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TOWN OF HOMER HOMER, LOUISIANA

FINANCIAL STATEMENTS AND

SUPPLEMENTARY INFORMATION

AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2018

TOWN OF HOMER

HOMER, LOUISIANA

TABLE OF CONTENTS

AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2018

Page

INDEPENDENT AUDITOR'S REPORT 1-3

MANAGEMENT'S DISCUSSION AND ANALYSIS 4-7

BASIC FINANCIAL STATEMENTS

Government-Wide Financial Statements:

Statement of Net Position 8

Statement of Activities 9

Fund Financial Statements:

Governmental Funds:

Balance Sheet 10

Reconciliation of the Governmental Funds' Balance Sheet to the Statement of Net Position 11

Statement of Revenues, Expenditures, and Changes in Fund Balances 12

Reconciliation of the Governmental Funds' Statement of Revenues, Expenditures, and

Changes in Fund Balances to the Statement of Activities 13

Proprietary Funds:

Statement of Net Position 14

Statement of Revenues, Expenses, and Changes in Net Position 15

Statement of Cash Flows 16

Notes to the Financial Statements 17-52

REQUIRED SUPPLEMENTARY INFORMATION

Budgetary Comparison Schedules:

General Fund 53

Special Revenue Fund – Street Fund 54

Special Revenue Fund – Industrial Development Fund 55

Special Revenue Fund – Police Fund 56

Schedule of Employer's Proportionate Share of Net Pension Liability 57

Schedule of Employer Contributions 58

OTHER SUPPLEMENTARY INFORMATION

Nonmajor Governmental Funds: Special Revenue Funds:

Combining Balance Sheet 59

Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 60

Schedule of Compensation to Mayor, Town Selectmen and Compensation, Benefits, Reimbursements

and Other Payments to or on Behalf of Agency Head 61

OTHER REPORTS

Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and

Other Matters Based on an Audit of Financial Statements Performed in Accordance with

Government Auditing Standards 62-63

Schedule of Findings 64-75

Status of Prior Audit Findings 76

Management Letter 77-81

Statewide Agreed-Upon Procedures Representation Letter 82-84

Independent Accountant's Report on Applying Statewide Agreed-Upon Procedures 85-99

Management’s Corrective Action Plan 100

Melissa Bosch, CPA (318) 475-1987 ∙ Michael Statham, CPA (318) 355-9943 609 North Trenton Street, Ruston, Louisiana 71270 ∙ Post Office Box 2377, Ruston, Louisiana 71273-2377

INDEPENDENT AUDITOR’S REPORT

To the Honorable Xanthe Seals, Mayor, and Members of the Board of Selectmen

Town of Homer, Louisiana

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Town of Homer, Louisiana, as of and for the year ended December 31, 2018, and the related notes to the financial statements, which collectively comprise the Town of Homer’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the Louisiana Governmental Audit Guide. Those standards and the guide require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

2

Town of Homer Independent Auditor’s Report December 31, 2018

Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Town of Homer, as of December 31, 2018, and the respective changes in financial position, and, where applicable, cash flows thereof, for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis (pages 4-7), budgetary comparison schedules (pages 53-56), the schedule of employer’s proportionate share of net pension liability (page 57), and the schedule of employer’s contributions (page 58) be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town of Homer’s basic financial statements. The combining nonmajor fund financial statements; the schedule of compensation to the Mayor and Board of Selectmen; and the schedule of compensation, benefits, reimbursements and other payments to Agency Head; are presented for purposes of additional analysis and are not a required part of the basic financial statements.

3

Town of Homer Independent Auditor’s Report December 31, 2018

The combining fund financial statements; the Schedule of Compensation to the Mayor and Board of Selectmen; and the Schedule of Compensation, Benefits, Reimbursements, and Other Payments to or on Behalf of Agency Head; are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining fund financial statements; the Schedule of Compensation to the Mayor and Board of Selectmen; and the Schedule of Compensation, Benefits, Reimbursements and Other Payments to Agency Head; are fairly stated in all material respects in relation to the basic financial statements as a whole.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated October 29, 2019, on our consideration of the Town of Homer’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Town of Homer’s internal control over financial reporting and compliance. BOSCH & STATHAM, LLC

Ruston, Louisiana October 29, 2019

TOWN OF HOMER, LOUISIANA

Management’s Discussion and Analysis As of and for the Year Ended December 31, 2018

4

Our discussion and analysis of the Town of Homer, Louisiana (the Town) provides an overview of the Town's activities for the year ended December 31, 2018. Please read it in conjunction with the Town's financial statements. USING THIS ANNUAL REPORT This annual report consists of a series of financial statements. The Statement of Net Position and the Statement of Activities provide information about the activities of the Town as a whole. Reporting the Town as a Whole The Statement of Net Position and the Statement of Activities These statements include all assets and liabilities using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of the current year's revenues and expenses are taken into account regardless of when cash is received or paid. These two statements report the Town's net position and changes in net position. The Town's net position (i.e., the difference between assets and liabilities) is a measure of the Town's financial position. The increases or decreases in the Town's net position are an indicator of whether its financial position is improving or deteriorating. THE TOWN AS A WHOLE At December 31, 2018, net position was as follows:

NET POSITION

Governmental Activities Business-type Activities

2018 2017 2018 2017

Current and other assets 795,404$ 982,078$ 1,132,157$ 1,030,571$

Capital assets, net 3,717,049 3,844,064 10,404,682 9,089,585

Total assets 4,512,453 4,826,142 11,536,839 10,120,156

Deferred outflows:

Pension related 376,036 503,130 - -

Liabilities:

Current 131,397 88,633 272,889 455,249

Long-term 1,117,245 1,344,001 5,282,262 4,370,753

Total liabilities 1,248,642 1,432,634 5,555,151 4,826,002

Deferred inflows:

Pension related 212,968 55,958 - -

Net position:

Net investment in capital assets 3,717,049 3,844,064 5,122,420 -

Unrestricted (290,170) (3,384) 859,268 5,294,154

Total net position 3,426,879$ 3,840,680$ 5,981,688$ 5,294,154$



5

Net position of the Town’s governmental activities decreased 11 percent during the year ended December 31, 2018. Net position decreased by $413,801. Revenues decreased $334,399 while expenses increased $142,632. Net position of the business-type activities increased from $5,289,844 to $5,981,688. For the year ended December 31, 2018, net position changed as follows:

CHANGE IN NET POSITION

Governmental Activities Business-type Activities

2018 2017 2018 2017

Program revenues:

Charges for services 155,587$ 177,658$ 1,161,362$ 1,213,451$

Operating grants and contributions 114,779 104,093 - -

Capital grants and contributions - - 556,413 582,127

General revenues:

Property taxes 121,022 130,791 - -

Sales and use taxes 1,222,776 1,229,842 328,997 350,010

Other taxes, licenses and permits 232,083 217,708 - -

Other 123,266 443,820 32,003 21,774

Total revenues 1,969,513 2,303,912 2,078,775 2,167,362

Expenses:

General government 622,978 595,600 - -

Public safety 1,011,338 907,909 - -

Highways and streets 376,456 351,526 - -

Health and welfare 22,278 21,923 - -

Culture and recreation 187,112 161,236 - -

Economic development 212,126 251,462 - -

Utilities - - 1,197,635 1,308,410

Interest expense - - 123,533 98,952

Total expenses 2,432,288 2,289,656 1,321,168 1,407,362

Transfers 65,763 - (65,763) -

Change in net position (397,012) 14,256 691,844 760,000

Net position at beginning of year, restated 3,823,891 3,826,424 5,289,844 4,534,154

Net position at end of year 3,426,879$ 3,840,680$ 5,981,688$ 5,294,154$



6

As of December 31, 2018, the Town’s Police Fund had a balance of $16,071. The General Fund has a fund balance of $354,778 which is a 23 percent decrease from prior year. During the year the Town recorded transfers of $426,946. The Street Fund balance decreased by $78,733 or 75 percent. Fund balance at year end was $26,607. Revenues decreased while expenditures increased. Transfers in were $30,146 compared to $9,055 in the prior year. The fund balance of the Industrial Development Fund decreased by $44,252 or 47 percent. Fund balance of the Police fund increased to $16,071, or 161 percent. Fund balance of the Enterprise Fund increased by 13 percent. Operations resulted in a loss of $36,273 after expenses of $1,197,635. Grants and sales taxes made up the loss before transfers. The net change in position was $691,844. BUDGETARY HIGHLIGHTS During the year, in the General Fund, there was a $121,657 increase in anticipated revenues. The change in estimate was due to increases in taxes. Anticipated expenditures decreased $6,834 or 1 percent. Actual revenues and other sources exceeded budgeted amounts by $38,769 or 5 percent. Actual expenditures and other uses exceeded budgeted amounts by $74,764 or 15 percent primarily due to nothing being budgeted for Lease/Rent for public safety as well as transfers to the Police Fund. During the year in the Street Fund, anticipated revenues decreased by 5 percent and expenditures increased by 21 percent. Actual expenditures and other uses exceeded budgeted amounts by 4 percent. In the Industrial Development Fund, budgeted revenues decreased by $3,300. Budgeted expenditures were decreased by 22 percent. Actual amounts exceeded budget by 46 and 22 percent, respectively. In the Police Fund, budgeted revenues increased by 5 percent while budgeted expenditures, excluding capital outlay, increased only $70,109 or 10 percent. Actual revenues and other sources decreased by 5 percent while actual expenditures and other uses, including capital outlay, increased by 9 percent.



7

CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets As of December 31, 2018, the Town’s investment in capital assets for its governmental and business-type activities amounts to $14,121,731 (net of accumulated depreciation). This investment includes the water and sewer systems, buildings and improvements, vehicles, machinery, equipment, and land. This year’s additions of $1,670,770 include projects funded by grants such as airport improvements, building improvements, a police vehicle, several vehicles for the Enterprise and Street departments, and water and sewer improvements as well as minor equipment purchases. Debt At year end, the Town had $1,865,000 in bonds outstanding and $3,417,262 in federal loans outstanding. See discussion of the terms in the notes to the financial statements. At December 31, 2018, the Town’s net pension liability at year end was $1,117,245. ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES The Town’s revenues are derived mainly from a special sales and use tax, property tax assessments, and fees for services. The Town uses grant monies to make necessary repairs and upgrades to the town’s water and sewer systems. CONTACTING THE TOWN’S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, and creditors with a general overview of the Town’s finances and to show the Town’s accountability for the money it receives. If you have any questions about this report or need additional financial information, contact the Town Clerk at Town Hall.

BASIC FINANCIAL STATEMENTS

The accompanying notes are an integral part of these financial statements. 8

TOWN OF HOMER

HOMER, LOUISIANA

STATEMENT OF NET POSITION

AS OF DECEMBER 31, 2018

Governmental Business-type

ASSETS Activities Activities Total

Cash and cash equivalents 516,801$ 602,173$ 1,118,974$

Cash and cash equivalents - restricted - 391,674 391,674

Receivables, net of allowance for uncollectibles 276,473 138,310 414,783

Capital assets not being depreciated 168,645 6,094,395 6,263,040

Capital assets, net of accumulated depreciation 3,548,404 4,310,287 7,858,691

Other assets 2,130 - 2,130

TOTAL ASSETS 4,512,453 11,536,839 16,049,292

DEFERRED OUTFLOWS

Pension related 376,036 - 376,036

LIABILITIES

Accounts payable 101,427 130,855 232,282

Payroll and related liabilities 9,395 - 9,395

Accrued liabilities 20,575 6,867 27,442

Accrued interest payable - 9,689 9,689

Customer deposits payable - 125,478 125,478

Noncurrent liabilities:

Due within one year - 220,000 220,000

Due in more than one year - 5,062,262 5,062,262

Net pension liability 1,117,245 - 1,117,245

TOTAL LIABILITIES 1,248,642 5,555,151 6,803,793

DEFERRED INFLOWS

Pension related 212,968 - 212,968

NET POSITION

Net investment in capital assets 3,717,049 5,122,420 8,839,469

Unrestricted net position (290,170) 859,268 569,098

TOTAL NET POSITION 3,426,879$ 5,981,688$ 9,408,567$

Primary Government


TOWN OF HOMER

HOMER, LOUISIANA

STATEMENT OF ACTIVITIES

FOR THE YEAR ENDED DECEMBER 31, 2018

CHARGES OPERATING CAPITAL

FOR GRANTS AND GRANTS AND GOVERNMENTAL BUSINESS-TYPE

FUNCTIONS/PROGRAMS EXPENSES SERVICES CONTRIBUTIONS CONTRIBUTIONS ACTIVITIES ACTIVITIES TOTAL

Governmental activities:

General government 622,978$ 97,357$ -$ -$ (525,621)$ (525,621)$

Public safety 1,011,338 56,305 64,250 - (890,783) (890,783)

Highways and streets 376,456 - 6,660 - (369,796) (369,796)

Health and welfare 22,278 - - - (22,278) (22,278)

Culture and recreation 187,112 - - - (187,112) (187,112)

Economic development 212,126 1,925 43,869 - (166,332) (166,332)

Total governmental activities 2,432,288 155,587 114,779 - (2,161,922) (2,161,922)

Business-type activities:

Utility operations 1,197,635 1,161,362 - 556,413 520,140$ 520,140

Interest expense 123,533 - - - (123,533) (123,533)

Total business-type activities 1,321,168 1,161,362 - 556,413 396,607 396,607

Total primary government 3,753,456$ 1,316,949$ 114,779$ 556,413$ (2,161,922) 396,607 (1,765,315)

General revenues:

Property taxes 121,022 - 121,022

Sales and use taxes 1,222,776 328,997 1,551,773

Franchise taxes 89,287 - 89,287

Other taxes, penalties and interest 142,796 - 142,796

Unrestricted investment earnings 10,341 13,413 23,754

Gain (loss) on sale of capital assets 3,417 - 3,417

Other 109,508 18,590 128,098

Transfers 65,763 (65,763) -

Total general revenues and transfers 1,764,910 295,237 2,060,147

Change in net position (397,012) 691,844 294,832

Net position at beginning of year, restated 3,823,891 5,289,844 9,113,735

Net position at end of year 3,426,879$ 5,981,688$ 9,408,567$

PROGRAM REVENUES

CHANGES IN NET POSITION

NET (EXPENSES) REVENUES AND


TOWN OF HOMER

HOMER, LOUISIANA

GOVERNMENTAL FUNDS

BALANCE SHEET


Industrial

General Street Development Police Nonmajor Total

ASSETS

Cash and cash equivalents 213,641$ 6,502$ 108,287$ 5,553$ 182,818$ 516,801$

Receivables, net 181,691 22,666 16,752 35,000 20,364 276,473

Other assets 2,130 - - - - 2,130

TOTAL ASSETS 397,462$ 29,168$ 125,039$ 40,553$ 203,182$ 795,404$

LIABILITIES AND FUND BALANCES

Liabilities:

Accounts payable 12,548$ 194$ 75,922$ 11,618$ 1,145$ 101,427$

Payroll and related liabilities 9,395 - - - - 9,395

Accrued liabilities 5,061 2,367 - 12,864 283 20,575

Unearned revenue 15,680 - - - - 15,680

Total liabilities 42,684 2,561 75,922 24,482 1,428 147,077

Fund balances:

Restricted fund balances - 26,607 49,117 16,071 201,754 293,549

Unassigned fund balances 354,778 - - - - 354,778

Total fund balances 354,778 26,607 49,117 16,071 201,754 648,327

TOTAL LIABILITIES AND FUND BALANCES 397,462$ 29,168$ 125,039$ 40,553$ 203,182$ 795,404$


TOWN OF HOMER

HOMER, LOUISIANA

RECONCILIATION OF THE GOVERNMENTAL FUNDS' BALANCE SHEET

TO THE STATEMENT OF NET POSITION


Total fund balances - governmental funds 648,327$

Amounts reported for governmental activities in the statement of

net position are different because:

Capital assets used in governmental activities are not financial resources 3,717,049

Unearned revenue from the fund financial statements recognized in the

government-wide financial statements 15,680

Deferred items for pension related items are not reported in the fund statements:

Deferred outflows 376,036

Deferred inflows (212,968)

Long-term liabilities are not due and payable in the current period and therefore

are not reported in the fund statements:

Net pension liability (1,117,245)

Net position of governmental activities 3,426,879$


TOWN OF HOMER

HOMER, LOUISIANA

GOVERNMENTAL FUNDS

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES


Industrial

General Street Development Police Nonmajor Total

Revenues:

Taxes:

Ad valorem 121,072$ -$ -$ -$ -$ 121,072$

Sales and use 394,620 260,701 - 307,672 259,783 1,222,776

Franchise 89,287 - - - - 89,287

Other taxes, penalties and interest 124,013 - - - 18,782 142,795

Licenses and permits 60,715 - - - - 60,715

Intergovernmental:

State funds:

Fire insurance rebate - - - - 25,000 25,000

Supplemental pay - - - 39,250 - 39,250

Other state funds 8,502 6,660 43,869 - - 59,031

Charges for services 22,440 - - 9,935 100 32,475

Fines - - - 46,270 - 46,270

Lease income 5,700 - 1,925 - - 7,625

Interest earned 5,017 385 1,645 191 3,103 10,341

Other revenues 61,140 8,469 - 16,142 971 86,722

Total revenues 892,506 276,215 47,439 419,460 307,739 1,943,359

Expenditures:

Current:

General government:

Legislative 24,000 - - - - 24,000

Finance and administrative 263,580 - - - - 263,580

Elections 1,351 - - - - 1,351

Other general government 239,711 - - - - 239,711

Public safety:

Department of Motor Vehicles 25,256 - - - - 25,256

Police Department - - - 846,415 - 846,415

Fire Department - - - - 108,657 108,657

Highways and streets - 331,510 - - - 331,510

Health and welfare 12,749 9,529 - - - 22,278

Culture and recreation 7,500 - - - 170,882 178,382

Economic development - - 61,039 - 25,732 86,771

Capital outlay - 45,149 30,652 22,458 - 98,259

Total expenditures 574,147 386,188 91,691 868,873 305,271 2,226,170

Excess (deficiency) of revenues over

(under) expenditures 318,359 (109,973) (44,252) (449,413) 2,468 (282,811)

Other financing sources (uses):

Operating transfers in 15,000 30,146 - 488,263 6,500 539,909

Operating transfers out (441,946) - - - (32,200) (474,146)

Sale of capital assets - 1,094 - 3,356 - 4,450

Total other financing sources and uses (426,946) 31,240 - 491,619 (25,700) 70,213

Net change in fund balances (108,587) (78,733) (44,252) 42,206 (23,232) (212,598)

Fund balances at beginning of year, restated 463,365 105,340 93,369 (26,135) 224,986 860,925

Fund balances at end of year 354,778$ 26,607$ 49,117$ 16,071$ 201,754$ 648,327$

The accompanying notes are an integral part of these financial statements.

13

TOWN OF HOMER

HOMER, LOUISIANA

RECONCILIATION OF THE GOVERNMENTAL FUNDS' STATEMENT OF REVENUES,

EXPENDITURES, AND CHANGES IN FUND BALANCES

TO THE STATEMENT OF ACTIVITIES


Net change in fund balances - total governmental funds (212,598)$

Governmental funds report capital outlays as expenditures. However, in the statement of

activities the cost of those assets is allocated over their estimated useful lives and reported

as depreciation expense.

Capital outlay 98,260

Depreciation (224,242)

Effect of adjusting proceeds from disposal of assets to gain (loss) (1,033)

Revenues in the statement of activities that do not provide current financial resources are

not reported as revenues in the funds.

Revenues deferred in the prior year (15,730)

Revenues deferred in the current year 15,680

Payments of long-term debt, including contributions to the retirement systems, are reported

as expenditures in governmental funds. However, these amounts are a reduction of long-

term liabilities in the Statement of Net Position and are not reflected in the Statement of

Activities.

Pension expense (80,135)

Contributions to pension plan from third parties 22,786

Change in net position of governmental activities (397,012)$


14

TOWN OF HOMER

HOMER, LOUISIANA

PROPRIETARY FUNDS

STATEMENT OF NET POSITION


ASSETS

Current assets:

Cash and cash equivalents 602,173$

Receivables, net 138,310

Total current assets 740,483

Noncurrent assets:

Cash and cash equivalents - restricted 391,674

Capital assets, net 10,404,682

Total noncurrent assets 10,796,356

TOTAL ASSETS 11,536,839

LIABILITIES

Current liabilities:

Accounts payable 130,855

Accrued interest on revenue bonds 9,689

Accrued liabilities 6,867

Customer deposits payable 125,478

Current portion of Long-term Liabilities 220,000

Total current liabilities 492,889

Noncurrent liabilities:

Noncurrent portion of Long-term Liabilities 5,062,262

Total noncurrent liabilities 5,062,262

Total liabilities 5,555,151

NET POSITION

Net investment in capital assets 5,122,420

Unrestricted net position 859,268

TOTAL NET POSITION 5,981,688$


15

TOWN OF HOMER

HOMER, LOUISIANA

PROPRIETARY FUNDS

STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION


Operating revenues:

Charges for sales and services:

Water charges 903,309$

Sewer charges 248,124

Garbage charges 9,929

Total operating revenues 1,161,362

Operating expenses:

Depreciation expense 257,413

Insurance expense 11,927

Maintenance and repair 69,904

Materials and supplies 20,149

Operating costs 392,298

Other expenses 108,533

Professional fees 15,458

Salaries and related benefits 239,905

Utilities 82,048

Total operating expenses 1,197,635

Operating income (loss) (36,273)

Nonoperating revenues (expenses):

Sales and use taxes 328,997

Intergovernmental revenues 556,413

Interest earned 13,413

Other revenues 18,590

Interest expense (123,533)

Gain (loss) on sale of capital assets -

Total nonoperating revenue (expenses) 793,880

Income (loss) before transfers 757,607

Transfers out (65,763)

Change in net position 691,844

Net position at beginning of year, restated 5,289,844

Net position at end of year 5,981,688$


16

TOWN OF HOMER

HOMER, LOUISIANA

PROPRIETARY FUNDS

STATEMENT OF CASH FLOWS


Cash flows from operating activities:

Receipts from customers and users 1,161,170$

Payments to suppliers (963,959)

Payments to employees (162,933)

Net cash provided by operating activities 34,278

Cash flows from noncapital financing activities:

Transfer to other funds (65,763)

Proceeds from sales taxes 330,587

Other receipts 18,590

Net cash provided by noncapital and related financing activities 283,414

Cash flows from capital and related financing activities:

Proceeds from capital debt 1,174,509

Proceeds from capital grants 512,856

Purchases of capital assets (1,479,762)

Principal paid on capital debt (263,000)

Interest paid on capital debt (121,993)

Net cash used by capital and related financing activities (177,390)

Cash flows from investing activities:

Interest received 13,413

Net cash provided by investing activities 13,413

Net increase (decrease) in cash and cash equivalents 153,715

Cash and cash equivalents, beginning of year

(including amounts in restricted accounts) 840,132

Cash and cash equivalents, end of year

(including amounts in restricted accounts) 993,847$

Reconciliation of operating loss to net cash

provided by operating activities:

Operating loss (36,273)$

Adjustments to reconcile operating loss to

cash provided by operating activities:

Depreciation expense 257,413

(Increase) decrease in accounts receivable (13,634)

Increase (decrease) in accounts payable (176,065)

Increase (decrease) in customer deposits (1,260)

Increase (decrease) in accrued liabilities 2,557

Increase (decrease) in accrued interest payable 1,540

Total adjustments 70,551

Net cash provided by operating activities 34,278$

Noncash investing, capital, and financing activities:

None

TOWN OF HOMER HOMER, LOUISIANA NOTES TO THE FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2018

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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Town of Homer, Louisiana, (the Town) was incorporated March 13, 1850, and granted a special charter under the provisions of Act No. 11 of the Louisiana Legislature. The Town operates under a Mayor-Selectmen form of government. The Town’s major operations include public safety, streets, recreation, and parks, utilities, and general administrative services. The accompanying basic financial statements of the Town of Homer have been prepared in conformity with generally accepted accounting principles as prescribed by the Governmental Accounting Standards Board (GASB). The basic financial statements present the financial position and results of operations of the various funds by the Town and the cash flows of the proprietary fund as of and for the year ended December 31, 2018. Reporting Entity GASB Statement 14 established criteria for determining the governmental reporting entity and component units that should be included within the reporting entity. Under provisions of this Statement, the Town of Homer is considered a primary government, since it is a special purpose government that has a separately elected governing body, is legally separate, and is fiscally independent of other state or local governments. As used in GASB Statement No. 14, fiscally independent means that the Town of Homer may, without the approval or consent of another governmental entity, determine or modify its own budget, levy its own taxes or set rates or charges, and issue bond debt. Basis of Presentation The financial report consists of Management’s Discussion and Analysis (MD&A), basic financial statements, notes to basic financial statements, and required supplementary information other than the MD&A. The MD&A provides an overview of the financial activities of the Town. The basic financial statements include the government-wide financial statements, fund financial statements, and the notes to the basic financial statements. The government-wide financial statements consist of a Statement of Net Position and a Statement of Activities. These statements are prepared using the economic resources measurement focus and the accrual basis of accounting. Major revenues such as ad valorem taxes, franchise taxes, licenses, and interest are all considered to be susceptible to accrual. Assets, liabilities, revenues, and expenses of the government are reported in the financial statements. The statements distinguish between the governmental and business-type activities of the Town by reporting each in a separate column.


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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Basis of Presentation (Continued) The fund financial statements report the Town as a collection of major and nonmajor funds presented on separate schedules by fund category – governmental, proprietary, and fiduciary funds.

The governmental fund statements include a balance sheet and a statement of revenues, expenditures, and changes in fund balances, with one column for the general fund, one for each of the other major funds, and one column combining all the nonmajor governmental funds. The statements are prepared using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized in the accounting period in which they become measurable and available to finance expenditures of the current period, generally considered sixty days after the end of the fiscal year. Expenditures are recognized in the accounting period in which the fund liability is incurred, if measurable, except for unmatured interest payments on general long-term liabilities which are recognized when due.

The proprietary fund statements include a statement of net position; a statement of revenues, expenses, and changes in fund net position; and a statement of cash flows. Each statement has a column for each major enterprise fund. The Town does not have any nonmajor proprietary funds or internal service funds. The proprietary fund statements are prepared using the economic resources measurement focus and the accrual basis of accounting in order to make a determination of net income, financial position, and cash flows.

Although the financial statements presented in each of these three schedules contain “total” columns, they merely combine rather than consolidate the funds. Hence, interfund transactions that generate receivables and payables or transfers from one fund to another are not eliminated.

Major funds are those whose revenues, expenditures/expenses, assets, or liabilities are at least ten percent of the total for their fund category or type (governmental or enterprise) and at least five percent of the corresponding element total for all governmental and enterprise funds combined. The data on the face of the three sets of financial statements must be accompanied by certain disclosures to ensure accurate information is presented in the form of a single set of notes to the basic financial statements.


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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Basis of Presentation (Continued) The major governmental funds of the Town are the General Fund, the Street Fund, the Industrial Development Fund, and the Police Fund.

The General Fund is the Town’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund.

The Street Special Revenue Fund accounts for a sales tax levied for the purpose of maintaining streets. The Industrial Development Fund accounts for sales taxes and grants for the purpose of developing industry in the Town. The Police Fund accounts for the operations of the police department financed by sales taxes, grants, fines, and transfers from the General Fund.

The Town reports one enterprise fund that accounts for the operation of the water system, sewer system, and garbage services.

Assets, Liabilities, and Net Position, Equity, or Net Fund Balances Cash and Investments The Town Clerk pools those cash resources for which she is responsible and invests them accordingly. For purposes of the financial statements, including the Statement of Cash Flows, the Town considers all highly liquid investments (including restricted assets) with a maturity of three months or less when purchased to be cash equivalents. Investments are reported at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Cash and investment earnings are recorded in the Fund that holds the investment.


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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Assets, Liabilities, and Net Position, Equity, or Net Fund Balances (Continued) Receivables and Payables Activity between funds that is outstanding at the end the fiscal year is referred to as either “due to or from other funds” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the non-current portion of interfund loans). Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances.” All internal balances are eliminated in the total primary government column. Receivables include all amounts susceptible to accrual that have not been collected at December 31 but will be collected soon enough after the end of the year to pay liabilities of that year. They include all amounts earned, but not collected at December 31. Receivables (net of any uncollectible amounts) and payables are reported on separate lines. Property taxes attach as an enforceable lien on property as of December 31. Taxes are levied by the Town in September or October, are actually billed in November or December. Billed taxes become delinquent on January 1 of the following year. Revenues from ad valorem taxes are budgeted in the year they are billed. Property taxes are collected by the Sheriff using the assessed value determined by the assessor of Claiborne Parish. For the year ended December 31, 2018, taxes of 8.45 mills were levied on property with assessed valuations totaling $14,644,726. The taxes are levied for general operating purposes. The following are the principal taxpayers and related property tax revenue for the Town:

% of Total Ad Valorem Tax

Assessed Assessed Revenue for

Taxpayer Valuation Valuation Municipality

Hays, James Michael 1,995,615$ 14% 16,863$

First Guaranty Bank 363,340 2% 3,070

Gibsland Bank & Trust 342,120 2% 2,891

Centerpoint Energy - Arkl 260,868 2% 2,204

Industrial Packaging Corp. 204,615 1% 1,729

Louisiana Machinery Co. 448,124 3% 1,460

Brookshire Food Stores, Inc. 172,565 1% 1,458

Cordell Properties, LLC 162,594 1% 1,374

Entergy Louisiana, Inc. 2,014,090 14% 1,322

Hibernia National Bank 156,310 1% 1,321

Totals 6,120,241$ 42% 33,692$


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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Assets, Liabilities, and Net Position, Equity, or Net Fund Balances Inventories and Prepaid Items Inventories consisting of office supplies and water and sewer plant supplies held for consumption are valued using the average cost method. The consumption method is used for financial reporting. Certain payments reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. Restricted Assets Restricted assets represent primarily cash and investments held separately and restricted according to bond indenture agreements. Cash held for water customer meter deposits is also reported as restricted. Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets, are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Infrastructure acquired or constructed after the implementation of GASB Statement No. 34 is reported. Capital assets are recorded as expenditures in each fund and capitalized at the government-wide level; capital assets of business-type activities are reported in the Enterprise Fund. The cost of normal maintenance and repairs that do not add to the value of the assets or materially extend assets’ lives are not capitalized. For reporting purposes, the Town defines capital assets as follows:

Land is an inexhaustible asset with no capitalization threshold and an unlimited useful life; therefore, it is not depreciated.

Buildings are permanent structures erected above ground, while improvements are major repairs, renovations, or additions that increase the future service potential of the asset. Leasehold improvements are improvements made by the lessee to leased property. They are depreciated principally using the straight-line method with an estimated useful life typically between 10 to 40 years for structures and improvements and 20 years for depreciable land improvements. Leasehold improvements are depreciated using the straight-line method with an estimated useful life depending on the term of the lease. Construction-in-progress is not depreciated.

Movable property (furniture, equipment, and vehicles) consists of assets that are not fixed or stationary in nature. The straight-line method of depreciation is used, which divides the historical cost by the estimated useful life of the asset, generally 5 to 10 years.

Infrastructure assets are roads, bridges, tunnels, drainage systems, water and sewer systems, dams, and lighting systems. Infrastructure is depreciated using the straight-line method with an estimated useful life of 40 years.

Donated capital assets are recorded at their estimated fair value at the date of donation.

The Town maintains a threshold level of $1,000 or more for capitalizing assets.


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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Assets, Liabilities, and Net Position, Equity, or Net Fund Balances Compensated absences Employees of the Town earn vacation leave depending upon their length of service. Employees may not accumulate and carry forward days of vacation leave beyond the end of each calendar year except in cases of emergency. All vacation and compensatory leave are expected to be liquidated with expendable financial resources and thus is considered short-term and recognized as a liability as appropriate. Long-Term Obligations In the government-wide financial statements, long-term obligations are reported as liabilities in the applicable governmental or business-type activities. In the fund financial statements, proprietary fund long-term obligations are reported as liabilities in the proprietary fund type statement of net position. Individual funds have been used to liquidate other long-term liabilities such as compensated absences, claims and litigation payable, etc. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds. In accordance with paragraph 16 of the Accounting Principles Board Opinion No. 21, unamortized balances of premiums and discounts are netted against the outstanding balance of the related bonds payable. Fund Balance Classifications and Net Position Fund balances are reported under the following fund balance classifications:

Non-spendable Includes fund balance amounts that cannot be spent either because it is not in spendable form or are legally or contractually required to be maintained intact.

Restricted Includes amounts that are constrained for specific purposes which are externally

imposed by providers, such as creditors or amounts constrained due to constitutional provisions or enabling legislation.

Committed Includes amounts that can only be used for specific purposes pursuant to constraints

that are internally imposed by the government through formal action of the Town Council and does not lapse at year-end.

Assigned Includes amounts that are constrained by the Council’s intent to be used for specific

purposes that are neither considered restricted nor committed.

Unassigned Includes amounts that have not been assigned to other funds and that have not been restricted, committed or assigned to specific purposes within the General Fund. Negative fund balances in other governmental funds can also be classified as unassigned.


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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Fund Balance Classifications and Net Position (Continued) The Town has a general policy to first use restricted resources for expenditures incurred for which both restricted and unrestricted (committed, assigned, and unassigned) resources are available. When expenditures are incurred for which only unrestricted resources are available, the general policy of the Town is to use committed resources first, followed by assigned, and then unassigned. The use of restricted/committed resources may be deferred based on a review of the specific transaction. The difference between assets and liabilities is “net position” on the government-wide, proprietary, and fiduciary fund statements. Net position is segregated into three categories on the government-wide statement of net position:

Net investment in capital assets - Consists of capital assets including restricted capital assets net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction or improvement of those assets.

Restricted net position - Consists of net position with constraints placed on the use either by (1) external groups, such as creditors, grantors, contributors, or laws or regulations of other governments; or (2) law through constitutional provisions or enabling legislations. The Town first uses restricted net position for expenses incurred when both restricted and unrestricted net position are available for use. The use of restricted net position may be deferred based on a review of the specific transaction. Unrestricted net position – The balance of net position that does not meet the definition of "restricted" or "net investment in capital assets."

Reconciliation of Government-wide and Fund Financial Statements The governmental fund balance sheet includes a reconciliation of the government-wide statements to the governmental fund financial statements. This reconciliation is necessary to bring the financial statements from the current financial resources measurement focus and modified accrual basis of accounting to the economic measurement focus and full accrual basis of accounting. Major items included in the reconciliation are capital assets, inventories and prepaids, long-term debt, accrued interest, long-term liabilities, and deferred revenue, which are shown on the government-wide but not the governmental fund statements.


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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Fund Balance Classifications and Net Position (Continued) Budgets The Town of Homer (Mayor and Board) uses the following budget practices:

Prior to December 31, the Mayor and Financial Consultant submits to the Selectmen a proposed operating budget for the fiscal year commencing the following January 1. The operating budget includes proposed expenditures and the means of financing them for the upcoming year. The budget is submitted in summary form. In addition, more detailed line item budgets are included for administrative control. The level of control for the detailed budgets is at the department head/function level. Public hearings are conducted to obtain taxpayer comment. During the month of December, the budget is legally enacted through passage of an ordinance. Formal budgetary integration is employed as a management control device during the year for the General Fund, Special Revenue Funds, and the Debt Service Fund. Budgets are adopted on the modified accrual basis. Appropriations lapse at the end of each fiscal year. The Mayor and Selectmen may authorize supplemental appropriations during the year.

Use of estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from those estimates.


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NOTE 2 - CASH AND CASH EQUIVALENTS Custodial credit risk is the risk that, in the event of a bank failure, the Town’s deposits may not be returned to it. The Town’s policy to ensure that there is no exposure to this risk is to require each financial institution to pledge its own securities to cover any amount in excess of Federal Depository Insurance Coverage. The policy is not a formal written policy. Louisiana Revised Statute 39:1229 imposes a statutory requirement on the custodial bank to advertise and sell the pledged securities within ten days of being notified by the Town that the fiscal agent bank has failed to pay deposited funds upon demand. At December 31, 2018, the Town has cash and cash equivalents (book balances) totaling $1,510,648 as follows:

Cash and cash equivalents:

Demand deposits 1,510,148$

Other 500

Total 1,510,648$

These deposits are stated at cost which approximates market. Under state law, these deposits (or the resulting bank balances) must be secured by federal deposit insurance or the pledge of securities owned by the fiscal agent bank. The market value of the pledged securities plus the federal deposit insurance must at all times equal the amount on deposit with the fiscal agent. These securities are held in the name of the pledging fiscal agent bank in a holding or custodial bank that is mutually acceptable to both parties. As of December 31, 2018, the Town’s bank balances were exposed to custodial credit risk as follows:

Insured by FDIC 250,000$

Uninsured and uncollateralized -

Collateralized by pledged securities not in the Town's name 1,397,358

Total balances exposed to custodial credit risk 1,397,358

Total bank balances 1,647,358$

NOTE 3 – RECEIVABLES The following is a summary of receivables at December 31, 2018:

Taxes

and Net

Licenses Accounts Intergovernmental Other Receivables

General 169,701$ -$ -$ 11,990$ 181,691$

Street 19,336 - - 3,330 22,666

Industrial Development - - 16,752 - 16,752

Police 30,174 - 75 4,751 35,000

Nonmajor 20,257 - - 107 20,364

Enterprise 28,813 64,998 43,557 942 138,310

Total 268,281$ 64,998$ 60,384$ 21,120$ 414,783$


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NOTE 4 – CAPITAL ASSETS A schedule of changes in capital assets for the year ended December 31, 2018, follows:

Beginning Ending

Balance Increases Decreases Balance


Capital assets not being depreciated:

Land 135,743$ -$ -$ 135,743$

Construction in progress 2,250 30,652 - 32,902

Total capital assets

not being depreciated 137,993 30,652 - 168,645

Capital assets being depreciated:

Infrastructure 3,330,717 - - 3,330,717

Land improvements 4,084,458 - - 4,084,458

Buildings 931,033 - - 931,033

Building improvements 324,784 - - 324,784

Furniture and equipment 284,406 57,408 - 341,814

Vehicles 629,778 10,200 (96,368) 543,610


being depreciated 9,585,176 67,608 (96,368) 9,556,416

Less accumulated depreciation for:

Infrastructure 2,377,421 68,849 - 2,446,270

Land improvements 1,932,111 92,128 - 2,024,239

Buildings 702,431 14,144 - 716,575

Building improvements 91,470 12,953 - 104,423


Vehicles 537,853 22,174 (95,335) 464,692

Total accumulated depreciation 5,879,105 224,242 (95,335) 6,008,012


being depreciated 3,706,071 (156,634) (1,033) 3,548,404

Governmental activities,

capital assets, net 3,844,064$ (125,982)$ (1,033)$ 3,717,049$


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NOTE 4 – CAPITAL ASSETS (CONTINUED)

Ending Ending

Balance Increases Decreases Balance

Business-type activities:

Capital assets not being depreciated:

Land 13,330$ -$ -$ 13,330$

Construction in progress 4,571,446 1,509,619 - 6,081,065


not being depreciated 4,584,776 1,509,619 - 6,094,395

Capital assets being depreciated:

Infrastructure 12,436,244 - - 12,436,244

Buildings 127,367 - - 127,367


Vehicles 176,698 31,746 - 208,444


being depreciated 12,823,667 62,891 - 12,886,558

Less accumulated depreciation for:

Infrastructure 7,945,551 244,549 - 8,190,100

Buildings 127,367 - - 127,367

Furniture and equipment 82,763 364 - 83,127

Vehicles 163,177 12,500 - 175,677

Total accumulated depreciation 8,318,858 257,413 - 8,576,271


being depreciated 4,504,809 (194,522) - 4,310,287

Business-type activities,

capital assets, net 9,089,585$ 1,315,097$ -$ 10,404,682$


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NOTE 4 – CAPITAL ASSETS (CONTINUED) Depreciation expense was charged as follows:


General government 14,201$

Public safety 31,010

Highways and streets 44,946

Culture and recreation 8,730

Economic development 125,355

Total 224,242$

NOTE 5 – INTERFUND TRANSFERS Interfund transfers during the year ended December 31, 2018, were as follows:

General Nonmajor Enterprise Total

General -$ 15,000$ -$ 15,000$

Street 28,146 2,000 - 30,146

Police 413,800 8,700 65,763 488,263

Nonmajor - 6,500 - 6,500

Total 441,946$ 32,200$ 65,763$ 539,909$

Transfers out

Tra

nsf

ers

in

During the year, transfers were recorded to eliminate interfund balances for which the Town does not anticipate it will be able to clear otherwise. Additionally, transfers include unrestricted amounts transferred to subsidize other funds.


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NOTE 6 – LONG-TERM OBLIGATIONS Debt is comprised of the following at December 31, 2018:

2013 Revenue Bonds:

1,865,000$

LDEQ Revolving Loan:

1,562,080

LDHH Revolving Loan:

1,855,182

Total 5,282,262$

$2,280,000 Sewer Revenue Bonds dated April 24, 2013, payable over a 20

year period in annual installments ranging from $69,460-$157,519

including interest through December 2033; interest at 3.25%.

The Town entered into a loan agreement with DEQ to fund system

improvements not to exceed $3,500,000 in 2013. Upon the payment of

each principal draw on the loan, twenty-eight and a half percent of the

principal amount of each draw on the loan is forgiven. Total draws on

the loan for the year ended December 31, 2015 were $1,007,600, of which

$287,886 was forgiven. The loan bears interest at a rate of .4500%.

The Town entered into a loan agreement with DHH to fund system

improvements not to exceed $3,600,000 in 2015. Upon the payment of

each principal draw on the loan, thirty percent of the principal amount of

each draw on the loan is forgiven. Total draws on the loan for the year

ended December 21, 2015 were $220,785, of which $66,235 was forgiven.

The loan bears interest at a rate of 2.95%.

Long-term liability activity for the year ended December 31, 2018, was as follows:

Beginning Forgiven/ Ending Due Within

Balance Additions Reductions Adjustment Balance One Year

Revenue Bonds - 2013 Issue 1,960,000$ -$ (95,000)$ -$ 1,865,000$ 100,000$

LDEQ Revolving Loan 1,495,567 227,517 (96,000) (65,004) 1,562,080 120,000

LDHH Revolving Loan 915,186 1,445,709 (72,000) (433,713) 1,855,182 -

Net pension liability 1,344,001 - (226,756) - 1,117,245 -

Total 5,714,754$ 1,673,226$ (489,756)$ (498,717)$ 6,399,507$ 220,000$


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NOTE 6 – LONG-TERM OBLIGATIONS (CONTINUED) Annual debt service requirements to maturity for bonds are as follows:

2013

Revenue

Bonds

2019 100,000

2020 100,000

2021 105,000

2022 110,000

2023 110,000

2024-2028 615,000

2029-2033 725,000

Total 1,865,000$

The Town has not completed drawing on the Department of Health and Hospital Drinking Water Revolving Loan Fund or the Department of Environment Quality Clean Water State Revolving Loan Fund. Future payments are not yet known. There are a number of limitations and restrictions contained in the various bond indentures. The Town is substantially in compliance with all significant limitations and restrictions. Interest expense for business-type activities for the year ended December 31, 2018, totaled $123,533. NOTE 7 – EQUITY All funds’ revenues include sales and use taxes which are restricted. Restricted net position is restricted for cash held for meter deposits and debt service. NOTE 8 – RETIREMENT SYSTEMS Municipal Employees' Retirement System of Louisiana (System) Plan Description The Town of Homer contributes to the Municipal Employees’ Retirement System of Louisiana (System) which is a cost sharing multiple employer defined benefit pension plan. The System is composed of two distinct plans, Plan A and Plan B, with separate assets and benefit provisions. All employees of the municipality are members of Plan A. All permanent employees working at least 35 hours per week who are not covered by another pension plan and are paid wholly or in part from municipal funds and all elected municipal officials are eligible to participate in the System.


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NOTE 8 – RETIREMENT SYSTEMS (CONTINUED) Municipal Employees' Retirement System of Louisiana (System) (Continued) Any member of Plan A who was hired before January 1, 2013, can retire providing the member meets on of the following criteria:

1. Any age with 25 years of creditable service. 2. Age 60 with a minimum of ten years of creditable service. 3. Under age 60 with five years of creditable service eligible for disability benefits. 4. Survivor’s benefits require five years creditable service at death of member. 5. Any age with 20 years of creditable service, exclusive of military service with an actuarially reduced

early benefit. Eligibility for retirement for Plan A members hired on or after January 1, 2013 is as follows:

1. Any age with 25 or more years of creditable service. 2. Age 60 with 10 or more years of creditable service. 3. Under age 60 with five years of creditable service eligible for disability benefits. 4. Survivor’s benefits require five years creditable service at death of member. 5. Any age with 20 years of creditable service, exclusive of military service with an actuarially reduced

early benefit. Generally, the monthly amount of the retirement allowance for any member of Plan A shall consist of an amount equal to 3% of the employee's final compensation multiplied by his or her years of creditable service. Final average compensation is the average monthly earnings during the highest sixty consecutive months, or joined months if service was interrupted. However, under certain conditions as outlined in the statutes, the benefits are limited to specified amounts. An additional regular retirement benefit can be received for any city marshal or deputy city marshal. See Plan Booklet for further details. The System also provides death and disability benefits. Benefits are established or amended by state statute. Any member of Plan A Tier 2 can retire providing he meets one of the following requirements.

1. Age 67 with seven years of creditable service. 2. Age 62 with ten years of creditable service. 3. Age 55 with thirty years of creditable service. 4. Any age with 25 years of creditable service with an actuarially reduced early benefit. 5. Survivor's benefits require five or more years of creditable service with legal spouse at least last

twelve months before death - 40% at age 60 or minimum of 20% immediately (actuarially calculated).


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NOTE 8 – RETIREMENT SYSTEMS (CONTINUED) Municipal Employees' Retirement System of Louisiana (System) (Continued) Generally, the monthly amount of retirement allowance for any member of Plan A Tier 2 shall consist of an amount equal to three percent of the member's final average compensation multiplied by his years of creditable service. Final average compensation is the average monthly earnings during the highest sixty consecutive months, or joined months if service was interrupted. However, under certain conditions as outlined in the statutes, the benefits are limited to specified amounts. Any city marshal or deputy city marshal shall receive an additional regular benefit computed on supplemental marshal's earnings. See Plan booklet for further details. Any member of Plan B who commenced participation in the System prior to January I, 2013 can retire providing he meets one of the following criteria:

1. Any age with thirty years of creditable service. 2. Age 60 with a minimum of ten or more years of creditable service. 3. Any age with ten years of creditable service eligible for disability benefits. 4. Survivor's benefits require five years creditable service at death of member.

Generally, the monthly amount of the retirement allowance for any member of Plan B shall consist of an amount equal to two percent of the member's monthly average final compensation multiplied by his years of creditable service. Final average compensation is the average monthly earnings during the highest sixty consecutive months, or joined months if service was interrupted. However, under certain conditions as outlined in the statutes, the benefits are limited to specified amounts. Any member of Plan B Tier 2 shall be eligible for retirement if he meets one of the following requirements:

1. Age 67 with seven years of creditable service. 2. Age 62 with ten years of creditable service. 3. Age 55 with thirty years of creditable service. 4. Any age with 25 years of creditable service, exclusive of military service and unused annual sick

leave. The monthly amount of the retirement allowance for any member of Plan B Tier 2 shall consist of an amount equal to two percent of the member's final average compensation multiplied by his years of creditable service. Final average compensation is the average monthly earnings during the highest sixty consecutive months, or joined months if service was interrupted. However, under certain conditions as outlined in the statutes, the benefits are limited to specified amounts.


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NOTE 8 – RETIREMENT SYSTEMS (CONTINUED) Municipal Employees' Retirement System of Louisiana (System) (Continued) Survivor Benefits Upon death of any member of Plan A with five or more years of creditable service, not eligible for retirement, the plan provides for benefits for the surviving spouse and minor children as outlined in the statutes. Any member of Plan A who is eligible for normal retirement at time of death and who leaves a surviving spouse will be deemed to have retired and selected Option 2 benefits on behalf of the surviving spouse on the date of death. Such benefits will begin only upon proper application and are paid in lieu of any other survivor benefits. Upon death of any member of Plan B with five or more years of creditable service, not eligible for normal retirement, the plan provides for benefits for the surviving spouse as outlined in the statutes.

1. Surviving spouse who is married no less than twelve months immediately preceding death of member, shall be paid a monthly benefit equal to thirty percent of the member's final compensation, payable when the surviving spouse attains the age of sixty years or becomes disabled and payable for as long as the surviving spouse lives, or

2. A monthly benefit equal to the actuarial equivalent of the benefit described above, but not less than fifteen percent of the member's final compensation, payable upon the death of the member and payable or as long as the surviving spouse lives. Selecting this benefit precludes the survivor from eligibility for the thirty percent benefit payable when the surviving spouse attains the age of sixty years.

Any member of Plan B who is eligible for normal retirement at time of death and who leaves a surviving spouse will be deemed to have retired and selected Option 2 benefits on behalf of the surviving spouse on the date of death. Such benefits will begin only upon proper application and are paid in lieu of any other survivor benefits. Any member of Plan A or Plan B who had not withdrawn their accumulated contributions and had at least twenty years of service credit at time of death, surviving spouse shall receive benefits for as long as he/she lives as outlined in the statutes. DROP Benefits In lieu of terminating employment and accepting a service retirement allowance, any member of Plan A or B who is eligible to retire may elect to participate in the deferred retirement option plan (DROP) for up to three years and defer the receipt of benefits. During participation in the plan, employer contributions are payable, but employee contributions cease. The monthly retirement benefits that would be payable, had the person elected to cease employment and receive a service retirement allowance, are paid into the DROP Fund. Interest is earned when the member has completed DROP participation. Interest earnings are based upon the actual rate of return on the investments identified as DROP funds for the period. In addition, no cost-of-living increases are payable to participants until employment which made them eligible to become members of the System has been terminated for at least one full year.


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NOTE 8 – RETIREMENT SYSTEMS (CONTINUED) Municipal Employees' Retirement System of Louisiana (System) (Continued) Upon termination of employment prior to or at the end of the specified period of participation, a participant in the DROP may receive, at his option, a lump sum from the account equal to the payments into the account, a true annuity based upon his account balance in that fund, or any other method of payment if approved by the board of trustees. If a participant dies during the participation in the DROP, a lump sum equal to the balance in his account shall be paid to his named beneficiary or, if none, to his estate. If employment is not terminated at the end of the three years, payments into the DROP fund cease and the person resumes active contributing membership in the System. Disability Benefits For Plan A, a member shall be eligible to retire and receive a disability benefit if he has at least five years of creditable service, is not eligible for normal retirement, and has been officially certified as disabled by the State Medical Disability Board. Upon retirement caused by disability, a member of Plan A shall be paid a disability benefit equal to the lesser of forty-five percent of his final average compensation or three percent of his final average compensation multiplied by his years of creditable service, whichever is greater, or an amount equal to three percent of the member's final average compensation multiplied by his years of creditable service projected to his earliest normal retirement age. For Plan B, a member shall be eligible to retire and receive a disability benefit if he has at least ten years of creditable service, in which he would receive a regular retirement benefit under retirement provisions. A member shall be eligible to retire and receive a disability benefit if he has at least ten years of creditable service, is not eligible for normal retirement, and has been officially certified as disabled by the State Medical Disability Board. Upon retirement caused by disability, a member of Plan B shall be paid a disability benefit equal to the lesser of thirty percent of his final average compensation or two percent of his final average compensation multiplied by his years of creditable service, whichever is greater, or an amount equal to two percent of the member's final average compensation multiplied by his years of creditable service, projected to his earliest normal retirement age. Cost of Living Increases The System is authorized under state law to grant a cost of living increase to members who have been retired for at least one year. The adjustment cannot exceed 2% of the retiree's original benefit for each full calendar year since retirement and may only be granted if sufficient funds are available from investment income in excess of normal requirements. State law allows the System to grant additional cost of living increases to all retirees and beneficiaries who are age sixty-five and above equal to 2% of the benefit being received on October 1, 1977, or the original benefit, if retirement commenced after that date. Deferred Benefits Both Plans provide for deferred benefits for members who terminate before being eligible for retirement. Once the member reaches the appropriate age for retirement, benefits become payable. Benefits are based on statutes in effect at time of withdrawal.


35

NOTE 8 – RETIREMENT SYSTEMS (CONTINUED) Municipal Employees' Retirement System of Louisiana (System) (Continued) For the year ended December 31, 2018, the Town of Homer’s total payroll for all employees was $927,262. Total covered payroll was $182,303. Covered payroll refers to all compensation paid by the Town of Homer to active employees covered by the Plan. The System issues an annual publicly available financial report that includes financial statements and required supplementary information for the System. The report may be obtained by writing to the Municipal Employees Retirement System of Louisiana, 7937 Office Park Boulevard, Baton Rouge, Louisiana 70809, or by calling (225) 925-4810, or by visiting the System's website www.mersla.com. Contributions Under Plan A, members are required by state statute to contribute 9.50% of their annual covered salary. The contributions are deducted from the employee’s wages or salary and remitted by the Town of Homer to the System monthly. The Town of Homer’s contributions to the System under Plan A for the year ending December 31, 2018 were $46,298. According to state statute, contribution requirements for all employers are actuarially determined each year. For the year ended December 31, 2018, the actual employer contribution rate was 24.75% for January through June and 26.00% for July through December for Plan A, actuarially determined as an amount that, when combined with employee contributions, is expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. In accordance with state statute, the System receives ad valorem taxes and state revenue sharing funds. These additional sources of income are used as employer contributions and are considered support from non-employer contributing entities but are not considered special funding situations. According to state statute, the System also receives 1/4 of 1% of ad valorem taxes collected within the respective parishes except for Orleans. Tax monies are apportioned between Plan A and Plan B in proportion to salaries of plan participants. Tax monies received from East Baton Rouge Parish are apportioned between the System and the Employee's Retirement System of the City of Baton Rouge. The System also receives revenue sharing funds each year as appropriated by the Legislature. These additional sources of income are used as additional employer contributions and considered support from non-employer contributing entities. Administrative costs of the System are financed through employer contributions. Pension Liabilities, Pension Expense, Deferred Outflows of Resources, and Deferred Inflows of Resources Related to Pensions At December 31, 2018, the Town of Homer reported a liability of $397,754 for its proportionate share of the Net Pension Liability. The Net Pension Liability was measured as of June 30, 2018 and the total pension liability used to calculate the Net Pension Liability was determined by an actuarial valuation as of that date. The Town of Homer’s proportion of the Net Pension Liability was based on a projection of the Town’s long-term share of contributions to the pension plan relative to the projected contributions of all participating employers, actuarially determined. At June 30, 2018, the Town’s proportion was 0.10%, which was an increase of 0.00140% from its proportion measured as of June 30, 2017.


36

NOTE 8 – RETIREMENT SYSTEMS (CONTINUED) Municipal Employees' Retirement System of Louisiana (System) (Continued) For the year ended December 31, 2018, the Town of Homer recognized pension expense of $62,215 plus employer’s amortization of change in proportionate share and differences between employer contributions and proportionate share of contributions, which was ($65,995). Total pension expense for the Town of Homer for the year ended December 31, 2018 was ($3,780). At December 31, 2018, the Town of Homer reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Outflows of Resources

Deferred Inflows of Resources

Differences between expected and actual experience $ -

$ 14,141

Changes in assumption 11,973 - Net difference between projected and actual earnings on pension plan investments

60,952

-

Changes in employer’s portion of beginning net pension liability

3,173

15,302 Differences between employer contributions and proportionate share of employer contributions

-

214 Subsequent measurement contributions

24,498 -

Total $ 100,596 $ 29,657 The $24,498 reported as deferred outflows of resources related to pensions resulting from the Town of Homer’s contributions subsequent to the measurement date will be recognized as a reduction of Net Pension Liability in the year ended December 31, 2018. Other amounts reported as deferred outflows of resources and deferred inflows of resources will be recognized in pension expense as follows:

Year ended December 31: 2019 $ 19,277 2020 20,047 2021 5,376 2022 1,742


37

NOTE 8 – RETIREMENT SYSTEMS (CONTINUED) Municipal Employees' Retirement System of Louisiana (System) (Continued) Actuarial Assumptions A summary of the actuarial methods and assumptions used in determining the total pension liability as of June 30, 2018 is as follows:

Valuation Date June 30, 2018 Actuarial Cost Method Entry Age Normal Actuarial Assumptions: Investment Rate of Return 7.275% Inflation rate 2.600% Salary increases, including inflation and merit increases

5.000%

Annuitant and beneficiary mortality RP-2000 Healthy Annuitant Sex Distinct Mortality Tables set forward 2 years for males and set forward 1 year for females projected to 2028 using scale AA.

Employee mortality RP-2000 Employees Sex Distinct Table set back 2 years for both males and females.

Disabled lives mortality RP-2000 Disabled Lives Mortality Table set back 5 years for males and set back 3 years for females.

Expected remaining service lives 3 years for Plan A The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expenses and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation and an adjustment for the effect of rebalancing/diversification. Best estimates of arithmetic real rates of return for each major asset class included in the System's target asset allocation as of June 30, 2018 are summarized in the following table:

Asset Class

Target Allocation

Long-Term Expected Real Rate of Return

Public equity 50% 2.2% Public fixed income 35% 1.5% Alternatives 15% 0.6% Totals 100% 4.3% Inflation 2.7% Expected arithmetic nominal return

7.0%


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NOTE 8 – RETIREMENT SYSTEMS (CONTINUED) Municipal Employees' Retirement System of Louisiana (System) (Continued) Discount Rate The discount rate used to measure the total pension liability was 7.275% for the years ended June 30, 2018. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current contribution rates and that contributions from participating employers will be made at the actuarially determined rates, which are calculated in accordance with relevant statutes and approved by the Board of Trustees and the Public Retirement Systems' Actuarial Committee. Based on those assumptions, the System's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. The effects of certain other changes in the net pension liability are required to be included in pension expense over the current and future periods. The effects on the total pension liability of (1) changes of economic and demographic assumptions or of other inputs and (2) differences between expected and actual experience are required to be included in pension expense in a systematic and rational manner over a closed period equal to the average of the expected remaining service lives of all employees that are provided with benefits through the pension plan (active employees and inactive employees), determined as of the beginning of the measurement period. The effect on net pension liability of differences between the projected earnings on pension plan investments and actual experience with regard to those earnings is required to be included in pension expense in a systematic and rational manner over a closed period of five years, beginning with the current period. The Expected Remaining Service Lives (ERSL) for 2018 is 3 years for Plan A and Plan B. Sensitivity of the Town of Homer’s Proportionate Share of the Net Pension Liability to Changes in the Discount Rate The following presents the Town of Homer’s proportionate share of the net pension liability calculated using the discount rate of 7.275%, as well as what the Town of Homer’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is one percentage-point lower (6.275%) or one percentage-point higher (8.275%) than the current rate:

1.0% Decrease (6.275%)

Current Discount Rate (7.275%)

1.0% Increase (8.275%)

Employer’s proportionate share of net pension liability

$ 3,934,304

$ 397,754

$ 2,318,736 Payables to the Pension Plan These financial statements do not include a payable to the pension plan.


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NOTE 8 – RETIREMENT SYSTEMS (CONTINUED) Municipal Employees' Retirement System of Louisiana (System) (Continued) Plan Fiduciary Net Position Detailed information about the Plan’s fiduciary net position is available in the separately issued Municipal Employees’ Retirement System of Louisiana Audit Report at www.mersla.com. Municipal Police Employees' Retirement System of Louisiana (System) Plan Description The Town of Homer contributes to the Municipal Police Employees’ Retirement System of Louisiana (System) which is a cost sharing multiple employer defined benefit pension plan. Membership in the System is mandatory for all full-time police officers employed by a municipality of the State of Louisiana and engaged in law enforcement, empowered to make arrests, providing he or she does not have to pay social security and providing he or she meets the statutory criteria. The System provides retirement benefits for municipal police officers. The projections of benefit payments in the calculation of the total pension liability includes all benefits to be provided to current active and inactive employees through the System in accordance with benefit terms and any additional legal agreements to provide benefits that are in force at the measurement date. Benefit provisions are authorized within Act 189 of 1973 and amended by LRS 11:2211-11:2233. The following is a brief description of the plan and its benefits and is provided for general information purposes only. Participants should refer to the appropriate statutes for more complete information. Any member of the Plan who was hired before January 1, 2013, can retire providing the member meets on of the following criteria:

1. Any age with 25 years of creditable service. 2. Age 50 with a minimum of twenty or more years of creditable service. 3. Age 55 with a minimum of twelve or more years of creditable service. 4. After 20 years of creditable service at any age, with an actuarially reduced benefit from age 55.

The monthly amount of benefits is 3 1/3% of their average final compensation (employee's average monthly earnings during the highest 36 consecutive or joined months if service was interrupted) per number of years of creditable service not to exceed 100% of final salary. Upon the death of an active contributing member, or disability retiree, the plan provides for surviving spouses and minor children. Under certain conditions outlined in the statutes, the benefits range from 40% to 60% of the member's average final compensation for the surviving spouse. In addition, each child under age 18 receives benefits equal to 10% of the member's average final compensation or $200 per month, whichever is greater.


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NOTE 8 – RETIREMENT SYSTEMS (CONTINUED) Municipal Police Employees' Retirement System of Louisiana (System) (Continued) Eligibility for retirement for members hired on or after January 1, 2013 is as follows: Hazardous Duty

1. Any age with 25 years of creditable service. 2. Age 55 with twelve or more years of creditable service. 3. After 20 years of creditable service at any age, with an actuarially reduced benefit from age 55.

Non-Hazardous Duty

1. Any age with 30 years of creditable service. 2. Age 55 with 25 or more years of creditable service. 3. Age 60 with 10 or more years of creditable service. 4. After 20 years of creditable service at any age, with an actuarially reduced benefit from age 55.

The benefit rates are three percent and two and a half percent, respectively, of average final compensation (average monthly earnings during the highest 60 consecutive months or joined months if service was interrupted) per number of years of creditable service not to exceed 100% of final salary. Upon death of an active contributing member, or disability retiree, the plan provides for surviving spouses and minor children. Under certain conditions outlined in the statues, the benefits range from 25% to 55% of the member's average final compensation for the surviving spouse. In addition, each child under age 18 receives 10% of average final compensation or $200 per month whichever is greater. If deceased member had less than 10 years of service, beneficiary will receive a refund of employee contributions only. Cost-of-Living Adjustments The Board of Trustees is authorized to provide annual cost-of-living adjustments computed on the amount of the current regular retirement, disability, beneficiary or survivor's benefit, not to exceed 3% in any given year. The Board is authorized to provide an additional 2% COLA, computed on the member's original benefit, to all regular retirees, disability, survivors and beneficiaries who are 65 years of age or older on the cut-off date which determines eligibility. No regular retiree, survivor or beneficiary shall be eligible to receive a cost-of-living adjustment until benefits have been received at least one full fiscal year and the payment of such COLA, when authorized, shall not be effective until the lapse of at least one-half of the fiscal year. Members who elect early retirement are not eligible for a cost of living adjustment until they reach regular retirement age.


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NOTE 8 – RETIREMENT SYSTEMS (CONTINUED) Municipal Police Employees' Retirement System of Louisiana (System) (Continued) Deferred Retirement Option Plan A member is eligible to elect to enter the deferred retirement option plan (DROP) when he is eligible for regular retirement based on the members' sub plan participation. Upon filing the application for the program, the employee's active membership in the System is terminated. At the entry date into the DROP, the employee and employer contributions cease. The amount to be deposited into the DROP account is equal to the benefit computed under the retirement plan elected by the participant at date of application. The duration of participation in the DROP is 36 months or less. If employment is terminated after the three-year period, the participant may receive his benefits by lump sum payment or a true annuity. If employment is not terminated, active contributing membership into the System shall resume and upon later termination, he shall receive additional retirement benefit based on the additional service. For those eligible to enter DROP prior to January 1, 2004, DROP accounts shall earn interest subsequent to the termination of DROP participation at a rate of half of one percentage point below the percentage rate of return of the System's investment portfolio as certified by the actuary on an annual basis but will never lose money. For those eligible to enter DROP subsequent to January 1, 2004, an irrevocable election is made to earn interest based on the System's investment portfolio return or a money market investment return. This could result in a negative earnings rate being applied to the account. If the member elects a money market investment return, the funds are transferred to a government money market account and cam interest at the money market rate. Initial Benefit Option Plan In 1999, the State Legislature authorized the System to establish an Initial Benefit Option program. Initial Benefit Option is available to members who are eligible for regular retirement and have not participated in DROP. The Initial Benefit Option program provides both a one-time single sum payment of up to 36 months of regular monthly retirement benefit, plus a reduced monthly retirement benefit for life. Interest is computed on the balance based on same criteria as DROP. For the year ended December 31, 2018, the Town of Homer’s total payroll for all employees was $911,753. Total covered payroll was $269,740. Covered payroll refers to all compensation paid by the Town of Homer to active employees covered by the Plan.

The System issues an annual publicly available financial report that includes financial statements and required supplementary information for the System. The report may be obtained by writing to the Municipal Police Employees’ Retirement System of Louisiana, 7722 Office Park Boulevard, Suite 200, Baton Rouge, Louisiana 70809, or by calling (225) 929-7411, or by visiting the System's website www.lampers.org.


42

NOTE 8 – RETIREMENT SYSTEMS (CONTINUED) Municipal Police Employees' Retirement System of Louisiana (System) (Continued) Contributions According to state statute, contribution requirements for all employers are actuarially determined each year. For the year ended December 31, 2018, the actual contribution rate was 30.75% for January through June and 32.25% for July through December, actuarially determined as an amount that, when combined with employee contributions, is expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. In accordance with state statute, the System receives ad valorem taxes and state revenue sharing funds. These additional sources of income are used as employer contributions and are considered support from non-employer contributing entities but are not considered special funding situations. Members are required by state statute to contribute 9.00% of their annual covered salary. The contributions are deducted from the employee’s wages or salary and remitted by the Town of Homer to the System monthly. The Town of Homer’s contributions to the System for the year ending December 31, 2018 were $85,131. Pension Liabilities, Pension Expense, Deferred Outflows of Resources, and Deferred Inflows of Resources Related to Pensions At December 31, 2018, the Employer reported a liability of $719,491 for its proportionate share of the Net Pension Liability. The Net Pension Liability was measured as of June 30, 2018 and the total pension liability used to calculate the Net Pension Liability was determined by an actuarial valuation as of that date. The Town of Homer’s proportion of the Net Pension Liability was based on a projection of the Town’s long-term share of contributions to the pension plan relative to the projected contributions of all participating employers, actuarially determined. At June 30, 2018, the Town’s proportion was 0.09%, which was a decrease of 0.02348% from its proportion measured as of June 30, 2017 For the year ended December 31, 2018, the Town of Homer recognized pension expense of $107,146 plus employer’s amortization of change in proportionate share and differences between employer contributions and proportionate share of contributions, which was ($23,231). Total pension expense for the Town of Homer for the year ended December 31, 2017 was $83,915.


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NOTE 8 – RETIREMENT SYSTEMS (CONTINUED) Municipal Police Employees' Retirement System of Louisiana (System) (Continued) At December 31, 2018, the Town of Homer reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Outflows of Resources

Deferred Inflows of Resources

Differences between expected and actual experience $ 3,243

$ 36,767

Changes in assumption 47,018 - Net difference between projected and actual earnings on pension plan investments

34,491

-

Changes in employer’s portion of beginning net pension liability

143,697

136,248 Differences between employer contributions and proportionate share of employer contributions

(1)

10,296 Subsequent measurement contributions

46,989 -

Total $ 275,438 $ 183,311 The $46,989 reported as deferred outflows of resources related to pensions resulting from the Town of Homer contributions subsequent to the measurement date will be recognized as a reduction of Net Pension Liability in the year ended December 31, 2018. Other amounts reported as deferred outflows of resources and deferred inflows of resources will be recognized in pension expense as follows:

Year ended December 31: 2019 $ 72,700 2020 36,209 2021 (65,020) 2022 1,250


44

NOTE 8 – RETIREMENT SYSTEMS (CONTINUED) Municipal Police Employees' Retirement System of Louisiana (System) (Continued) Actuarial Assumptions A summary of the actuarial methods and assumptions used in determining the total pension liability as of June 30, 2018 as follows:

Valuation Date June 30, 2018 Actuarial Cost Method Entry Age Normal Cost Actuarial Assumptions: Investment Rate of Return 7.20%, net of investment expense Inflation rate 2.60% Mortality RP-2000 Combined Healthy with Blue Collar

Adjustment Sex Distinct Tables projected to 2029 by Scale AA (setback 1 year for females) for healthy annuitants and beneficiaries. RP-2000 Disabled Lives Table set back 5 years for males and set back 3 years for females for disabled annuitants. RP-2000 Employee Table set back 4 years for males and 3 years for females for active members.

Projected salary increases Years of service Salary growth rate 1-2 9.75% 3-23 4.75% Over 23 4.25% Expected remaining service lives 4 years Cost-of-Living Adjustments The present value of future retirement benefits is

based on benefits currently being paid by the System and includes previously granted cost-of-living increases. The present values do not include provisions for potential future increases not yet authorized by the Board of Trustees.

The mortality rate assumption used was set based upon an experience study performed by the prior actuary on plan data for the period July 1, 2009 through June 30, 2014, and review of similar law enforcement mortality. The data was assigned credibility weighting and combined with a standard table to produce current levels of mortality. This mortality was then projected forward to a period equivalent to the estimated duration of the System's liabilities. Annuity values calculated based on this mortality were compared to those produced by using a set-back of standard tables. The result of the procedure indicated that the tables used would produce liability values approximating the appropriate generational mortality tables. The best estimates of the arithmetic nominal rates of return for each major asset class included in the System's target allocation as of June 30, 2018 are summarized in the following table:


45

NOTE 8 – RETIREMENT SYSTEMS (CONTINUED) Municipal Police Employees' Retirement System of Louisiana (System) (Continued)

Asset Class

Target Allocation

Long-Term Expected Real Rate of Return

Equity 52% 3.58% Fixed income 22% 0.46% Alternatives 20% 1.07% Other 6% 0.17% Totals 100% 5.28% Inflation 2.75% Expected arithmetic nominal return

8.03%

Discount Rate The discount rate used to measure the total pension liability was 7.20%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current contribution rates and that contributions from participating employers will be made at the actuarially determined rates approved by PRSAC taking into consideration the recommendation of the System's actuary. Based on those assumptions, the System's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the Town of Homer’s Proportionate Share of the Net Pension Liability to Changes in the Discount Rate The following presents the Town of Homer’s proportionate share of the net pension liability calculated using the discount rate of 7.20%, as well as what the Town of Homer’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is one percentage-point lower (6.20%) or one percentage-point higher (8.20%) than the current rate:

1.0% Decrease (6.20%)

Current Discount Rate (7.20%)

1.0% Increase (8.20%)

Employer’s proportionate share of net pension liability

$ 1,011,084

$ 719,491

$ 474,856

Payables to the Pension Plan These financial statements do not include a payable to the pension plan.


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NOTE 8 – RETIREMENT SYSTEMS (CONTINUED) Municipal Police Employees' Retirement System of Louisiana (System) (Continued) Plan Fiduciary Net Position Detailed information about the Plan’s fiduciary net position is available in the separately issued Municipal Police Employees’ Retirement System of Louisiana Audit Report at www.lampers.org. NOTE 9 – ON-BEHALF PAYMENTS Certain employees in the Town’s police department receive supplemental pay from the state of Louisiana. In accordance with GASB Statement No. 24, the Town has recorded revenues and expenditures for these payments in the General Fund. Revenues under this arrangement totaled $39,250. The related expenditures of $39,250 are included in expenditures in the Police Fund. NOTE 10 – COMMITMENTS AND CONTINGENCIES At December 31, 2018, the Town has multiple water and sewer projects in progress which are being funded by a combination of loans and grants. The combined total of contracts connected with the projects exceeds eight million dollars. Estimated remaining balances on the contracts exceeds $1,000,000. At December 31, 2018, the Town is involved in several lawsuits which are being handled by the Town Attorney and attorneys retained by the Town’s insurance company. The suits are in various stages in the court systems. Legal counsel did not estimate potential liability on most suits. However, total potential liability that counsel did estimate is in the range of $100,000. Errors have been identified in the calculation of contributions to retirement systems. Management will evaluate the errors that may have occurred for a period of time to be determined. These errors could result in an amount due to or from employees or retirement systems. NOTE 11 – RISK MANAGEMENT The Town is exposed to various risks of loss relating to torts, theft of, damage to, and destruction of assets, errors and omissions, injuries to employees, and natural disasters. These risks are covered by commercial insurance purchased from independent third parties. NOTE 12 – SUBSEQUENT EVENTS Management has evaluated subsequent events through October 29, 2019, the date on which the financial statements were available to be released. There have been developments subsequent to the balance sheet date in the litigation described in Note 10. However, the developments do not significantly change the Town’s estimated potential liability.


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NOTE 13 – STEWARDSHIP For the year ended December 31, 2018, for the sum of expenditures and other uses, actual amounts exceeded budgeted amounts in the following funds:

Original Final Unfavorable

Fund Budget Budget Actual Variance

General 792,217$ 870,383$ 1,011,093$ (140,710)$

Street 306,931 372,474 386,188 (13,714)

Industrial Development 96,000 74,963 91,691 (16,728)

Police 705,645 795,354 868,873 (73,519)

NOTE 14 – ACCOUNTING STANDARDS GASB has issued the following statements: Issued in June of 2015, GASB Statement 74, Financial Reporting for Postemployment Benefit Plans Other than Pension Plans, and GASB Statement 75, Accounting and Financial Reporting for Postemployment Benefits Other than Pensions, aim to improve accounting and financial reporting for OPEB, resulting from a comprehensive review of the effectiveness of existing standards. The requirements of these Statements will improve financial reporting through enhanced note disclosures and schedules of RSI that will be presented by OPEB plans. These Statements establish standards for recognizing and measuring liabilities, deferred outflows and inflows of resources, and expenses/expenditures. GASB 74 is effective for years beginning after May 26, 2016, and GASB 75 is effective for years beginning after June 15, 2017. The Town is not impacted by the provisions of this Statement. GASB Statement No. 80, Blending Requirements for Certain Component Units—an amendment of GASB Statement No. 14, was issued in January 2016. This Statement amends the blending requirements for the financial statement presentation of component units of all state and local governments. The additional criterion requires blending of a component unit incorporated as a not-for-profit corporation in which the primary government is the sole corporate member. The additional criterion does not apply to component units included in the financial reporting entity pursuant to the provisions of Statement No. 39, Determining Whether Certain Organizations Are Component Units. The requirements of this Statement are effective for reporting periods beginning after June 15, 2016. Earlier application is encouraged. This statement does not affect the Town’s financial statements.


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NOTE 14 – ACCOUNTING STANDARDS (CONTINUED) GASB Statement No. 81, Irrevocable Split-Interest Agreements, was issued in March 2016. This Statement requires that a government that receives resources pursuant to an irrevocable split-interest agreement recognize assets, liabilities, and deferred inflows of resources at the inception of the agreement. Furthermore, this Statement requires that a government recognize assets representing its beneficial interests in irrevocable split-interest agreements that are administered by a third party, if the government controls the present service capacity of the beneficial interests. This Statement requires that a government recognize revenue when the resources become applicable to the reporting period. The requirements of this Statement are effective for financial statements for periods beginning after December 15, 2016 and should be applied retroactively. Earlier application is encouraged. This statement does not affect the Town’s financial statements. GASB Statement No. 82, Pension Issues—an amendment of GASB Statements No. 67, No. 68, and No. 73, was issued in March 2016. This Statement clarifies that a deviation, as the term is used in Actuarial Standards of Practice issued by the Actuarial Standards Board, from the guidance in an Actuarial Standard of Practice is not considered to be in conformity with the requirements of Statement 67, Statement 68, or Statement 73 for the selection of assumptions used in determining the total pension liability and related measures. This Statement clarifies that payments that are made by an employer to satisfy contribution requirements that are identified by the pension plan terms as plan member contribution requirements should be classified as plan member contributions for purposes of Statement 67 and as employee contributions for purposes of Statement 68. It also requires that an employer’s expense and expenditures for those amounts be recognized in the period for which the contribution is assessed and classified in the same manner as the employer classifies similar compensation other than pensions (for example, as salaries and wages or as fringe benefits). The requirements of this Statement are effective for reporting periods beginning after June 15, 2016, except for the requirements of this Statement for the selection of assumptions in a circumstance in which an employer’s pension liability is measured as of a date other than the employer’s most recent fiscal year-end. In that circumstance, the requirements for the selection of assumptions are effective for that employer in the first reporting period in which the measurement date of the pension liability is on or after June 15, 2017. Earlier application is encouraged. This statement will not have a significant effect on the Town’s financial statements. GASB Statement No. 83, Certain Asset Retirement Obligations, was issued in November 2016. This Statement addresses accounting and financial reporting for certain asset retirement obligations (AROs). An ARO is a legally enforceable liability associated with the retirement of a tangible capital asset. A government that has legal obligations to perform future asset retirement activities related to its tangible capital assets should recognize a liability based on the guidance in this Statement. The requirements of this Statement are effective for reporting periods beginning after June 15, 2018. Earlier application is encouraged. This statement is not expected to affect the Town’s financial statements. GASB Statement No. 84, Fiduciary Activities, was issued in January 2017. The objective of this Statement is to improve guidance regarding the identification of fiduciary activities for accounting and financial reporting purposes and how those activities should be reported. The requirements of this Statement are effective for reporting periods beginning after December 15, 2018. Earlier application is encouraged. This statement is not expected to affect the Town’s financial statements.


49

NOTE 14 – ACCOUNTING STANDARDS (CONTINUED) GASB Statement No. 85, Omnibus 2017, was issued in March 2017. The objective of this Statement is to address practice issues that have been identified during implementation and application of certain GASB Statements. This Statement addresses a variety of topics including issues related to blending component units, goodwill, fair value measurement and application, and postemployment benefits (pensions and other postemployment benefits [OPEB]). The requirements of this Statement are effective for reporting periods beginning after June 15, 2017. Earlier application is encouraged. This statement is not expected to have a significant impact on the Town’s financial statements. GASB Statement No. 86, Certain Debt Extinguishment Issues, was issued in May 2017. The primary objective of this Statement is to improve consistency in accounting and financial reporting for in-substance defeasance of debt by providing guidance for transactions in which cash and other monetary assets acquired with only existing resources—resources other than the proceeds of refunding debt—are placed in an irrevocable trust for the sole purpose of extinguishing debt. This Statement also improves accounting and financial reporting for prepaid insurance on debt that is extinguished and notes to financial statements for debt that is defeased in substance. The requirements of this Statement are effective for reporting periods beginning after June 15, 2017. Earlier application is encouraged. This statement is not expected to affect the Town’s financial statements. GASB Statement No. 87, Leases, was issued in June 2017. The objective of this Statement is to better meet the information needs of financial statement users by improving accounting and financial reporting for leases by governments. This Statement increases the usefulness of governments’ financial statements by requiring recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and recognized as inflows of resources or outflows of resources based on the payment provisions of the contract. It establishes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. Under this Statement, a lessee is required to recognize a lease liability and an intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources, thereby enhancing the relevance and consistency of information about governments’ leasing activities. The requirements of this Statement are effective for reporting periods beginning after December 15, 2019. Earlier application is encouraged. GASB Statement No. 88, Certain Disclosures Related to Debt, including Direct Borrowings and Direct Placements, was issued in April 2018. The primary objective of this Statement is to improve the information that is disclosed in notes to government financial statements related to debt, including direct borrowings and direct placements. It also clarifies which liabilities governments should include when disclosing information related to debt. This Statement defines debt for purposes of disclosure in notes to financial statements as a liability that arises from a contractual obligation to pay cash (or other assets that may be used in lieu of cash) in one or more payments to settle an amount that is fixed at the date the contractual obligation is established. This Statement requires that additional essential information related to debt be disclosed in notes to financial statements, including unused lines of credit; assets pledged as collateral for the debt; and terms specified in debt agreements related to significant events of default with finance-related consequences, significant termination events with finance-related consequences, and significant subjective acceleration clauses. For notes to financial statements related to debt, this Statement also requires that existing and additional information be provided for direct borrowings and direct placements of debt separately from other debt. The requirements of this Statement are effective for reporting periods beginning after June 15, 2018. Earlier application is encouraged.


50

NOTE 14 – ACCOUNTING STANDARDS (CONTINUED) GASB Statement No. 89, Accounting for Interest Cost Incurred before the End of a Construction Period, was issued in June 2018. The objectives of this Statement are (1) to enhance the relevance and comparability of information about capital assets and the cost of borrowing for a reporting period and (2) to simplify accounting for interest cost incurred before the end of a construction period. This Statement establishes accounting requirements for interest cost incurred before the end of a construction period. Such interest cost includes all interest that previously was accounted for in accordance with the requirements of paragraphs 5–22 of Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements, which are superseded by this Statement. This Statement requires that interest cost incurred before the end of a construction period be recognized as an expense in the period in which the cost is incurred for financial statements prepared using the economic resources measurement focus. As a result, interest cost incurred before the end of a construction period will not be included in the historical cost of a capital asset reported in a business-type activity or enterprise fund. This Statement also reiterates that in financial statements prepared using the current financial resources measurement focus, interest cost incurred before the end of a construction period should be recognized as an expenditure on a basis consistent with governmental fund accounting principles. The requirements of this Statement are effective for reporting periods beginning after December 15, 2019. Earlier application is encouraged. The requirements of this Statement should be applied prospectively. GASB Statement No. 90, Majority Equity Interests – an amendment of GASB Statements No. 14 and No. 61, was issued in August 2018. The primary objectives of this Statement are to improve the consistency and comparability of reporting a government’s majority equity interest in a legally separate organization and to improve the relevance of financial statement information for certain component units. It defines a majority equity interest and specifies that a majority equity interest in a legally separate organization should be reported as an investment if a government’s holding of the equity interest meets the definition of an investment. A majority equity interest that meets the definition of an investment should be measured using the equity method, unless it is held by a special-purpose government engaged only in fiduciary activities, a fiduciary fund, or an endowment (including permanent and term endowments) or permanent fund. Those governments and funds should measure the majority equity interest at fair value. For all other holdings of a majority equity interest in a legally separate organization, a government should report the legally separate organization as a component unit, and the government or fund that holds the equity interest should report an asset related to the majority equity interest using the equity method. This Statement establishes that ownership of a majority equity interest in a legally separate organization results in the government being financially accountable for the legally separate organization and, therefore, the government should report that organization as a component unit. This Statement also requires that a component unit in which a government has a 100 percent equity interest account for its assets, deferred outflows of resources, liabilities, and deferred inflows of resources at acquisition value at the date the government acquired a 100 percent equity interest in the component unit. Transactions presented in flows statements of the component unit in that circumstance should include only transactions that occurred subsequent to the acquisition. The requirements of this Statement are effective for reporting periods beginning after December 15, 2018. Earlier application is encouraged. The requirements should be applied retroactively, except for the provisions related to (1) reporting a majority equity interest in a component unit and (2) reporting a component unit if the government acquires a 100 percent equity interest. Those provisions should be applied on a prospective basis.


51

NOTE 14 – ACCOUNTING STANDARDS (CONTINUED) GASB Statement No. 91, Conduit Debt Obligations, was issued May 2019. The primary objectives of this Statement are to provide a single method of reporting conduit debt obligations by issuers and eliminate diversity in practice associated with (1) commitments extended by issuers, (2) arrangements associated with conduit debt obligations, and (3) related note disclosures. This Statement achieves those objectives by clarifying the existing definition of a conduit debt obligation; establishing that a conduit debt obligation is not a liability of the issuer; establishing standards for accounting and financial reporting of additional commitments and voluntary commitments extended by issuers and arrangements associated with conduit debt obligations; and improving required note disclosures. The requirements of this Statement are effective for reporting periods beginning after December 15, 2020. Earlier application is encouraged. NOTE 15 – FUND BALANCE/NET POSITION RESTATEMENT Fund Financial Statements The following table discloses restatements of certain fund balances by fund:

Beginning

Beginning Prior Period Balance, as

Balance Adjustments Restated

General Fund 466,700$ (3,335)$ 463,365$

Street Fund 107,641 (2,301) 105,340

Industrial Development Fund 93,369 - 93,369

Police Fund (15,245) (11,872) (27,117)

Nonmajor Funds 225,250 (264) 224,986

Enterprise Fund 5,294,154 (4,310) 5,289,844

The beginning fund balances changed due to accrued payroll in the prior year not being recorded. Governmental-Wide Financial Statements The following table discloses restatements of net position for governmental and business-type activities in the government-wide financial statements.

Beginning

Beginning Prior Period Balance, as

Balance Adjustments Restated

Governmental Activities 3,840,680$ (17,772)$ 3,822,908$

Business-type Activities 5,294,154 (4,310) 5,289,844


52

NOTE 15 – FUND BALANCE/NET POSITION RESTATEMENT (CONTINUED) Beginning net position for governmental activities and business-type activities decreased due to restatements of beginning net position/fund balance recorded in governmental and business-type funds and accounts.

REQUIRED SUPPLEMENTARY INFORMATION OTHER THAN MANAGEMENT’S DISCUSSION AND ANALYSIS

53

TOWN OF HOMER

HOMER, LOUISIANA

BUDGETARY COMPARISON SCHEDULE

GENERAL FUND


Variance

with

Final Budget

Favorable

Original Final Actual (Unfavorable)

Revenues:

Taxes 639,000$ 742,294$ 728,992$ (13,302)$

Licenses and permits 62,120 62,120 60,715 (1,405)

Intergovernmental revenues - 8,502 8,502 -

Charges for services 2,500 2,500 22,440 19,940

Lease income 4,500 4,500 5,700 1,200

Interest earned 3,300 5,155 5,017 (138)

Other revenues 20,660 28,666 61,140 32,474

Total revenues 732,080 853,737 892,506 38,769

Expenditures:

Current:

General government:

Finance and administrative 257,347 257,960 263,580 (5,620)

Legislative 24,000 24,000 24,000 -

Elections - - 1,351 (1,351)

Other general government 195,970 204,113 239,711 (35,598)

Public safety - - 25,256 (25,256)

Health and welfare 16,900 5,810 12,749 (6,939)

Culture and recreation 12,000 7,500 7,500 -

Total expenditures 506,217 499,383 574,147 (74,764)

Excess (deficiency) of revenues over

expenditures 225,863 354,354 318,359 (35,995)

Other sources (uses):

Operating transfers in - - 10,000 10,000

Operating transfers out (286,000) (371,000) (436,946) (65,946)

Total other sources (uses) (286,000) (371,000) (426,946) (55,946)

Net change in fund balance (60,137) (16,646) (108,587) (91,941)

Fund balance at beginning of year, restated 456,323 466,700 463,365 (3,335)

Fund balance at end of year 396,186$ 450,054$ 354,778$ (95,276)$

Budgeted Amounts

Note: This schedule is prepared on the modified accrual basis.

54

TOWN OF HOMER

HOMER, LOUISIANA

BUDGETARY COMPARSION SCHEDULE

STREET FUND SPECIAL REVENUE FUND


Variance

with

Final Budget

Favorable


Revenues:

Taxes 292,190$ 270,935$ 260,701$ (10,234)$

Intergovernmental revenues 6,660 6,660 6,660 -

Interest earned 300 425 385 (40)

Other revenues 1,000 8,469 8,469 -

Total revenues 300,150 286,489 276,215 (10,274)

Expenditures:

Current:

Highways and streets 294,281 316,474 331,510 (15,036)

Health and welfare 6,000 9,000 9,529 (529)

Capital outlay 6,650 47,000 45,149 1,851


Excess (deficiency) of revenues over expenditures (6,781) (85,985) (109,973) (23,988)


Operating transfers in - 10,000 30,146 20,146

Gain (loss) on sale of capital assets - 1,094 1,094 -

Total other sources (uses) - 11,094 31,240 20,146

Net change in fund balance (6,781) (74,891) (78,733) (3,842)

Fund balance at beginning of year, restated 58,798 107,641 105,340 (2,301)


Budgeted Amounts


55

TOWN OF HOMER

HOMER, LOUISIANA

BUDGETARY COMPARISON SCHEDULE

INDUSTRIAL DEVELOPMENT FUND SPECIAL REVENUE FUND


Variance

with

Final Budget

Favorable


Revenues:

Intergovernmental revenues 33,000$ 27,125$ 43,869$ 16,744$

Lease income 900 3,725 1,925 (1,800)

Interest earned 1,900 1,650 1,645 (5)

Total revenues 35,800 32,500 47,439 14,939

Expenditures:

Current:

Economic development 96,000 61,063 61,039 24

Capital outlay - 13,900 30,652 (16,752)



Net change in fund balances (60,200) (42,463) (44,252) (1,789)

Fund balance at beginning of year 110,646 93,369 93,369 -


Budgeted Amounts


56

TOWN OF HOMER

HOMER, LOUISIANA

BUDGETARY COMPARSION SCHEDULE

POLICE FUND SPECIAL REVENUE FUND


Variance

with

Final Budget

Favorable


Revenues:

Taxes 303,633$ 311,986$ 307,672$ (4,314)$

Intergovernmental revenues 42,000 42,000 39,250 (2,750)

Charges for services 6,350 16,310 9,935 (6,375)

Fines 65,000 55,300 46,270 (9,030)

Interest earned 200 170 191 21

Other revenues 3,100 16,113 16,142 29

Total revenues 420,283 441,879 419,460 (22,419)

Expenditures:

Current

Public safety:

Police Department 696,645 766,754 846,415 (79,661)

Capital outlay 9,000 28,600 22,458 6,142




Operating transfers in 286,000 371,700 488,263 116,563

Gain (loss) on sale of capital assets - 3,356 3,356 -

Total sources (uses) 286,000 375,056 491,619 116,563

Net change in fund balance 638 21,581 42,206 20,625

Fund balance at beginning of year, restated 56,834 (20,897) (26,135) (5,238)

Fund balance at end of year 57,472$ 684$ 16,071$ 15,387$

Budgeted Amounts


57

TOWN OF HOMER HOMER, LOUISIANA SCHEDULE OF EMPLOYER’S SHARE OF NET PENSION LIABILITY FOR THE YEAR ENDED DECEMBER 31, 2018

Employer's

proportion

of the net

pension

liability

(asset)

Employer's

proportionate

share of the

net pension

liability (asset)

Employer's

covered

employee

payroll

Employer's

proportionate share

of the net pension

liability (asset) as a

percentage of its

covered employee

payroll

Plan fiduciary net

pension as a

percentage of the

total pension

liability

MERS:

2015 0.12% 411,998$ 204,808$ 201.16% 66.18%

2016 0.11% 447,846$ 195,185$ 229.45% 62.11%

2017 0.09% 395,999$ 171,461$ 230.96% 62.49%

2018 0.10% 397,754$ 175,376$ 227.00% 63.94%

MPERS:

2015 0.07% 514,574$ 203,239$ 253.19% 70.73%

2016 0.08% 711,013$ 200,023$ 355.47% 66.04%

2017 0.11% 948,002$ 259,984$ 364.64% 70.08%

2018 0.09% 719,491$ 251,157$ 286.00% 71.89% Schedule is intended to show information for 10 years. Additional years will be displayed as they become available.

58

TOWN OF HOMER HOMER, LOUISIANA SCHEDULE OF EMPLOYER’S CONTRIBUTIONS FOR THE YEAR ENDED DECEMBER 31, 2018

Contractually

required

contribution

Contributions

in relation to

contractually

required

contribution

Contribution

deficiency

(excess)

Employer's

covered

employee

payroll

Contributions

as a

percentage of

covered

employee

payroll

MERS:

2015 39,508$ 39,508$ -$ 200,041$ 19.75%

2016 37,727$ 37,727$ -$ 178,288$ 21.16%

2017 41,538$ 41,538$ -$ 174,909$ 23.75%

2018 46,298$ 46,298$ -$ 182,303$ 25.40%

MPERS:

2015 59,826$ 59,826$ -$ 181,321$ 32.99%

2016 74,355$ 74,355$ -$ 237,491$ 31.31%

2017 80,794$ 80,794$ -$ 258,472$ 31.26%

2018 85,131$ 85,131$ -$ 269,740$ 31.56%

Schedule is intended to show information for 10 years. Additional years will be displayed as they become available.

OTHER SUPPLEMENTARY INFORMATION

59

TOWN OF HOMER

HOMER, LOUISIANA

NONMAJOR GOVERNMENTAL FUNDS

COMBINING BALANCE SHEET


Total

Nonmajor

Governmental

Fire Recreation Contingency Tourism Funds

ASSETS

Cash and cash equivalents 153,515$ 25,329$ 3,537$ 437$ 182,818$

Receivables, net 5,844 10,129 4,391 - 20,364

TOTAL ASSETS 159,359$ 35,458$ 7,928$ 437$ 203,182$

LIABILITIES AND FUND BALANCES

Liabilities:

Accounts payable 735$ -$ -$ 410$ 1,145$

Accrued liabilities 283 - - - 283

Total liabilities 1,018 - - 410 1,428

Fund balances:

Restricted fund balances 158,341 35,458 7,928 27 201,754

Total fund balances 158,341 35,458 7,928 27 201,754

TOTAL LIABILITIES AND FUND BALANCES 159,359$ 35,458$ 7,928$ 437$ 203,182$

60

TOWN OF HOMER

HOMER, LOUISIANA

NONMAJOR GOVERNMENTAL FUNDS

COMBINING STATEMENT OF REVENUES, EXPENDITURES,

AND CHANGES IN FUND BALANCES

FOR THE YEAR ENDED DECEMBER 31, 2018 Total

Nonmajor

Governmental

Fire Recreation Contingency Tourism Funds

Revenues:

Taxes:

Sales and use 84,864$ 128,796$ 46,123$ -$ 259,783$

Other taxes, penalties and interest - - - 18,782 18,782

Intergovernmental:

State funds:

Intergovernmental - state funds - fire insurance rebate 25,000 - - - 25,000

Charges for services 100 - - - 100

Interest earned 2,219 759 89 36 3,103

Other revenues - 971 - - 971

Total revenues 112,183 130,526 46,212 18,818 307,739

Expenditures:

Current:

Public safety - police department: 108,657 - - - 108,657

Culture and recreation - 159,482 11,400 - 170,882

Economic development - - - 25,732 25,732

Total expenditures 108,657 159,482 11,400 25,732 305,271

Excess (deficiency) of revenues over (under) expenditures 3,526 (28,956) 34,812 (6,914) 2,468

Other financing sources (uses):

Operating transfers in - - - 6,500 6,500

Operating transfers out - - (32,200) - (32,200)

Total other financing sources and uses - - (32,200) 6,500 (25,700)

Net change in fund balances 3,526 (28,956) 2,612 (414) (23,232)

Fund balances at beginning of year 154,815 64,414 5,316 441 224,986

Fund balances at end of year 158,341$ 35,458$ 7,928$ 27$ 201,754$

61

TOWN OF HOMER

HOMER, LOUISIANA

SCHEDULE OF COMPENSATION TO MAYOR AND BOARD OF SELECTMEN


Roy Lewis, Mayor 48,000$

Alonzo Mitchell 4,800

Ray Jiles 4,800

Keldron Johnston 4,800

Brandon Rich 4,800

Clifton Mozeke 4,800

Total 72,000$

TOWN OF HOMER

HOMER, LOUISIANA

SCHEDULE OF COMPENSATION, BENEFITS, REIMBURSEMENTS

AND OTHER PAYMENTS TO OR ON BEHALF OF AGENCY HEAD


Roy Lewis, Mayor:

Salary 48,000$

Payroll Taxes 3,672

Insurance 8,193

Travel 409

Registration Fees 290

Conference Travel 3,194

Total 63,758$

OTHER REPORTS


Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements

Performed in Accordance with Government Auditing Standards

To the Honorable Xanthe Seals, Mayor and Honorable Members of the Board of Selectmen Town of Homer Homer, Louisiana

We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of Town of Homer, Louisiana, as of and for the year ended December 31, 2018, and the related notes to the financial statements, which collectively comprise the Town of Homer, Louisiana’s basic financial statements, and have issued our report thereon dated October 29, 2019.

Internal Control over Financial Reporting

In planning and performing our audit of the financial statements, we considered the Town of Homer’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Town of Homer’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Town of Homer’s internal control.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented or detected and corrected on a timely basis. We consider the deficiencies described in the accompanying schedule of findings and questioned costs as items 2018-002, 2018-003, 2018-005, and 2018-006 to be material weaknesses.

63

Town of Homer Homer, Louisiana Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters December 31, 2018

A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider the deficiencies described in the accompany schedule of findings and questioned costs as item 2018-007 to be a significant deficiency.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the Town of Homer’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed instances of noncompliance or other matters that are required to be reported under Government Auditing Standards and which are described in the accompanying schedule of findings and responses as items 2018-001, 2018-004, 2018-008, 2018-009, and 2018-010.

Town of Homer’s Response to Findings

The Town of Homer’s responses to the findings identified in our audit are described in the accompanying schedule of findings and responses. The Town of Homer’s responses were not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on them.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Although the intended use of this report may be limited, under Louisiana Revised Statute 24:513, it is issued by the Legislative Auditor as a public document. BOSCH & STATHAM, LLC


TOWN OF HOMER HOMER, LOUISIANA SCHEDULE OF FINDINGS FOR THE YEAR ENDED DECEMBER 31, 2018

64

A. SUMMARY OF AUDITOR’S RESULTS

1. The auditor's report expresses an unqualified opinion on whether the basic financial statements of the Town of Homer were prepared in accordance with GAAP.

2. Four material weakness is reported in the Independent Auditor’s Report on Internal

Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards.

3. One significant deficiency relating to the audit of the financial statements are reports

in the Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards.

4. Five instances of noncompliance material to the financial statements of the Town of

Homer, which are required to be reported in accordance with Government Auditing Standards, were disclosed during the audit.

B. FINDINGS – FINANCIAL STATEMENTS AUDIT 2018-001 Maintenance of the Minute and Ordinance Books

First Reported 2016 Type Noncompliance with Charter

Criteria Section 11 of the Town of Homer’s Charter states, “It shall be the duty of the clerk to record in a well bound book all the proceedings, bylaws, ordinances and police regulations adopted by the mayor and selectmen, and to cause the same to be promulgated by publication in the newspapers of the Town, and that no bylaw, ordinance or police regulation shall have effect until it shall have been so published for ten (10) days.

Condition The ordinances that adopted the budgets for 2016, 2017, and 2018, were not filed in the ordinance book at the time of their adoption. During each year’s audit, we noted the current year’s budget was not filed in the book. Cause The Town Clerk did not file the ordinances. No one monitored the ordinance book to ensure it was properly maintained.


65

Effect The Town is not in compliance with its charter. Official records could be lost if not properly retained. Recommendation The Clerk files copies of minutes and documents in a filing cabinet. We recommend that the only official files be the minute book and the ordinance book where documents should be directly filed. We recommend that the Town Clerk prepare written policies and procedures to address the procedures for filing documents in the Town’s official minute book and ordinance book. The Town Clerk should obtain the Mayor’s approval for the policies and procedures. Once the written policies and procedures are approved, they should be implemented. In the interim period, we recommend that the Town Clerk review the Ordinance Book and the Minute Book to ensure that they are complete.

Management’s Response See management’s corrective action plan.

2018-002 Lack of Controls over Credit Cards First Reported 2018 Type Material Weakness in Internal Control


66

Criteria Basic internal control procedures include: 1) Requiring a purchase order prior to incurring expenses on behalf of the Town and 2) Requiring signatures to document goods or services were received. The Town’s purchasing policy requires: 1) Centralized purchasing 2) Purchase orders 3) Receiving reports 4) Invoices and 5) Verification of documentation to support payments initialed and dated by the Mayor and Clerk. The Town’s credit card policy states that credit cards are not to be used for personal purposes, routine or recurring purchases, or purchases that are subject to the requirements of the Louisiana Public Bid Law. The policy also states that: 1) purchases made by credit card must not circumvent the Town’s purchasing policies and procedures and 2) employees are responsible for obtaining receipts and documenting business purposes. Further, the policy states the following:

1. “The clerk is responsible for reviewing the receipts and documentation for propriety (authorization to purchase, documentation of business purpose, etc.) upon the return of the card.

2. At the end of each month, the clerk is to compare the card issuance log, purchase documentation, and purchase orders to the monthly card statement. During this review, the clerk is to ensure that: (1) all card purchases were documented on the issuance log (checking for card usage approval); (2) all purchases are supported by documentation (checking for inappropriate purchases and completeness of purchase documentation); and (3) all purchases were supported by an approved purchase order (checking for proper approval for the purchases).

3. Any purchase/charge without appropriate supporting documentation requires a detailed explanation and description and the written approval of the mayor.”

Condition Controls over the use of Town credit cards are inadequate. Purchases that could be made locally were made on the credit card. We noted no evidence of purchase orders for the purchases on credit cards which indicates the purchases may have circumvented the purchasing system. There is no documented review and approval of statements and receipts. There was at least one instance where it appeared that a purchase was shipped to an employee’s home address. We scanned the credit card statements looking for any unusual items. Noticing what appeared to be a large volume of purchases and questionable purchases, we selected VISA statements for July, September, and November 2018 for further testing. We prepared a summary of charges that may not be necessary and reasonable for the Town or may not be for a town expenditure. Many items could be used in the ordinary operation of the Town but may also be useful in a household. Some of the quantities seemed unusually large.


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Purchases summarized for the three months totaled $878.39, $2,504.44, and $3,266.89. Purchases included the following:

Monthly Apple iTunes subscription Party decorations including multiple types of specialty paper such as linen paper, vellum

paper, and cardstock Adobe Acropro Subscription Amazon Prime Subscription Uniforms Batteries Laptop chargers Animal traps Fire department equipment and supplies

In other months’ statements that we did not recap, we noted the following items:

Batteries Cleaning supplies Office supplies Desktop computer Laptop computer Paper – glossy 8.5x11, glossy 8.5x14, glossy 11x17 Picture frames Mini fridge Coffee, creamer, and water Self-laminating sheets Transparent sticker paper 11x17 heavyweight glossy card stock USB charging cable Streaming media cable Ethernet adapter for Amazon Fire TV devices

Cause Town policies and procedures were not followed. Effect The Town did not comply with its own policies. Unauthorized purchases could be made. The Town may have paid for goods or services that it did not receive or that were unnecessary.


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Recommendation Proper internal control includes the environment, risk assessment, information and communication, and monitoring. It is imperative that all employees who are involved in purchasing in any manner believe that management expects the policies to be followed. We recommend:

1. That employees be reminded of the policies and their purposes. 2. That employees be notified that policies will be enforced. 3. That checks to vendors be prepared or signed only if the documentation is complete and

appropriate. Management’s Response See management’s corrective action plan. 2018-003 Errors in Payroll Processing First Reported 2018 Type Material Weakness in Internal Control Criteria Basic internal control over payroll includes procedures to ensure that time reports supporting paychecks are accurate, reviewed, and approved. Town policies should be enforced to include completely and accurately preparing required forms. All state and federal laws and regulations related to payroll should be adhered to.


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Condition During other audit procedures we became aware of potential errors in calculations of employee and employer contributions to the Municipal Police Employees Retirement System. Therefore, we expanded our testing of payroll transactions multiple times. Ultimately, for five selected police department employees, we selected one paycheck per quarter for additional testing. Of the twenty transactions tested, twelve of the transactions showed a shortage of retirement contributions both employee and employer portions totaling $84.23 and $269.53, respectively. Projecting those errors to all police department employees participating in the system and all paychecks for the year, the total shortage could be $3,000 or more for 2018. We expect that the issue affected multiple years. We also noted the following issues:

1. Retirement contributions for police department employees are always based on 84 hours of regular pay regardless of the number of hours worked by employees. The police department works 12-hour shifts for 7 days out of each pay period.

2. Overtime is sometimes paid after 86 hours instead of the 84 hours in the shift. This may or may not be an issue since the Fair Labor Standards Act requires overtime to be paid for law enforcement after 86 hours. However, the Town was not consistent in the use of the threshold for overtime.

3. The Town’s personnel policy does not address the threshold for overtime, how to handle instances where employees’ time is short or over for a pay period without authorization.

4. If an employee works part of the pay period and is out part of the pay period, whether due to illness, vacation, or holiday, the hours are shown as regular hours even if that total exceeds 84 hours. Of the twenty transactions we tested, the misclassification of time resulted in $357.75 being presented as regular hours instead of holiday.

5. If an employee works overtime, the time is converted to regular hours and appears on the payroll register as regular hours. For example, if an employee works 90 hours, instead of seeing 84 regular hours and 6 overtime hours at appropriate rates, the register will show 93 (84 plus (6 times 1.5)) regular hours at the employee’s regular rate.

Cause Internal control policies and procedures may not be adequately designed and may not have been followed. There is no documented review and approval of payroll processing. Previous training may have been misleading. Effect We identified the following effects of the weakness:

Employees could be over or under compensated. Contributions to the retirement systems may have been incorrect. The Town could owe

employees and/or the retirement systems or employees and/or the retirement systems could owe the Town.

Payroll reports produced by the Town’s payroll accounting software will not be accurate with respect to hours worked and hours paid for leave.


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Recommendation Proper internal control includes the environment, risk assessment, information and communication, and monitoring. We recommend:

1. Management should immediately determine the correct calculations for the issues described above and ensure that future payrolls are correct.

2. That employees be reminded of the policies and their purposes. 3. That policies be evaluated to determine the need for updates and revisions. 4. That the contracted CPA perform an analysis of payroll to determine whether there were

errors in payments to particular employees and to retirement systems. Management should determine what period of time should be evaluated in consultation with legal counsel.

5. Based on the analysis and the advice of legal counsel, management should make plans to collect monies owed to the Town and/or remit monies owed to employees or retirement systems.

Management’s Response See management’s corrective action plan. 2018-004 Noncompliance with LA Public Bid Law First Reported 2018 Type Noncompliance with State Law Criteria Louisiana Revised Statute 38:2212.1 states in part, “A.(1)(a) All purchases of any materials or supplies exceeding the sum of thirty thousand dollars to be paid out of public funds shall be advertised and let by contract to the lowest responsible bidder who has bid according to the specifications as advertised, and no such purchase shall be made except as provided in this Part. (b) However, purchases of ten thousand dollars or more, but less than thirty thousand dollars, shall be made by obtaining not less than three telephone or facsimile quotations. A written confirmation of the accepted offer shall be obtained and made a part of the purchase file. If quotations lower than the accepted quotation are received, the reasons for their rejection shall be recorded in the purchase file.” Condition During inquiries, the Town responded that no items were let for bid and no quotes were obtained for any purchases. During other audit procedures, we noted the purchase of a dump truck for $71,746 and the purchase of a 2013 Chevy Tahoe for $10,200. Cause Internal control over compliance with the bid law failed to ensure compliance.


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Effect The Town did not comply with the bid law. Since the bid law is intended to ensure that Louisiana governmental entities purchase equipment at the best available price, the Town may have incurred unnecessary costs. Recommendation We recommend that management evaluate written policies and procedures to ensure they are complete and clear. The policies and procedures should include an element of monitoring to ensure that policies and procedures are implemented and continually followed. Finally, we recommend that the Town Attorney be consulted before large purchases are initiated. This procedure should also be included in the Town’s written policies and procedures. Management’s Response See management’s corrective action plan. 2018-005 Error in Industrial Development Fund Budget First Reported 2018 Type Material Weakness in Internal Control Criteria Generally accepted accounting principles require a budget to actual statement that includes columns for the original budget, amended budget, and actual amounts. Basic internal control procedures include comparison of budget amounts to actual amounts throughout the year. Both management and the Board should be reviewing such comparisons and using them to make decisions. Condition The original budget column presented in the original budget and the same column presented in the amended budget did not agree with each other. Therefore, incorrect comparisons were presented to the board and the auditor. Cause There was no apparent review of the preparation of the budget documents. Effect Management and the Board may have used incorrect information during the year. The required supplementary information (budget comparison schedule) in the year-end financial statements might have contained incorrect amounts. Recommendation We recommend that internal control include review of the budget documents by someone other than the preparer.


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Management’s Response See management’s corrective action plan. 2018-006 Failure to Update Receivables and Payables First Reported 2018 Type Material Weakness in Internal Control Criteria Basic accounting procedures include reversing prior year receivables and payables and recording current year amounts. Condition The trial balances submitted to the auditor contained prior year receivable and payable amounts totaling approximately $342,000 and $416,000. Prior year receivables and payables were not reversed, and current year amounts were not recorded. Cause There was an election during the fiscal period that resulted in turnover of management and the accountant as of year-end. Effect Audit adjustments were required. Financial statements provided to management and the Board during the fiscal year were misstated. Recommendation We recommend that appropriate adjustments be made at year end prior to audit if not monthly. Management should evaluate internal control to ensure that the deficiency is addressed. Management’s Response See management’s corrective action plan. 2018-007 Late Payments on the Accounts of Officials and Employees First Reported 2018 Type Significant Deficiency in Internal Control


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Criteria Best practices in management of utility services include ensuring that service is terminated when a customer fails to pay a bill on time. Additionally, employees and elected officials should be held to a higher standard than other customers. Adjustments to customer accounts should only be made when the Town is at fault such as when a billing error is made. Condition We inspected utility account histories for the accounts of elected officials and employees of town hall. We noted that several officials and employees regularly paid late incurring penalties. At two separate times during the year, one employee failed to completely pay the balance in her utility account as she only made partial payments in some months. It appears that the employee’s water service was not terminated as is prudent in such situations. Small adjustments were made to reduce the balances of the aforementioned employee and one other. Cause Internal control failed to ensure that cutoff policies were enforced. Effect The parties charged with enforcing utility account policies did not set an example by following the policies themselves. Improper adjustments may be made to customer accounts. When service is not terminated in accordance with policy, balances may reach a point that a customer cannot pay which could result in lost revenue. Recommendation We recommend that management evaluate current written policies and make revisions as necessary to include monitoring to make sure policies are properly implemented. Management’s Response See management’s corrective action plan. 2018-008 Lack of Evidence of Required Ethics Training First Reported 2018 Type Noncompliance with State Law Criteria LRS 42:1170 requires each public official and public servant to complete one hour of ethics training during each year of his public employment or term of office. Condition We selected five employees or officials for testing. There was no documentation of 2018 training for three out of five employees or officials.


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Cause We were unable to determine the cause. Effect The Town and the individuals are not in compliance with state law. Recommendation We recommend that the Town’s designated liaison ensure that all officials and employees receive the required training in a timely manner. Management’s Response See management’s corrective action plan. 2018-009 Failure to Amend Budgets in Accordance with the Local Government Budget Act First Reported 2018 Type Noncompliance with State Law Criteria The Louisiana Local Government Budget Act states the following regarding budget amendments “A. When the governing authority has received notification pursuant to R.S. 39:1311, or there has been a change in operations upon which the original adopted budget was developed, the governing authority shall adopt a budget amendment in an open meeting to reflect such change. When an independently elected parish official has received notification pursuant to R.S. 39:1311(A), or when there has been a change in operations upon which the original adopted budget was developed, the independently elected official shall adopt a budget amendment and publish such amendment in the official journal as described by R.S. 39:1307(B). In no event shall a budget amendment be adopted proposing expenditures which exceed the total of estimated funds available for the fiscal year.” Condition For the year ended December 31, 2018, the General Fund, Industrial Development Fund, and Police Fund’s expenditures and other uses exceeded the final amended budgeted expenditures by 15%, 22%, and 39%, respectively. Cause The cause of the variances in the General and Police Funds is unclear. An audit adjustment for additional payables was required in the Industrial Development Fund. Effect The Town is not in compliance with the Budget Act. The Budget Act is designed to prevent overspending.


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Recommendation We recommend that management be diligent in estimating expenditures for the year in order to amend the budget when required to by the Act and presumably prevent overspending. Management’s Response See management’s corrective action plan. 2018-010 Audit Report Filed After Due Date Year First Reported 2018 Type Noncompliance with State Law Criteria The Louisiana Audit law requires the Town to submit audited financial statements by June 30th following the December 31st year end. Condition The Town’s audited financial statements as of and for the year ended December 31, 2018, will be filed with the Legislative Auditor after the due date of June 30, 2019. Cause The auditor identified an issue with the calculation of retirement contributions which required further procedures. The condition is reported in findings number 2018-003 Effect The Town is not in compliance with the audit law and will not receive state funds that may be due until the report is submitted. Recommendation We recommend that management consider the findings and audit adjustments and make additional changes where necessary to ensure that the next audit can be completed as efficiently as possible. Management’s Response See management’s corrective action plan.

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TOWN OF HOMER

HOMER, LOUISIANA

STATUS OF PRIOR AUDIT FINDINGS


Fiscal Year Planned Corrective

Finding Description Corrective Action/Partial

Initially of Action Taken Corrective

Ref. No. Occurred Finding Yes, No, Partially Action Taken

2017-001 2016 Maintenance of the Minute and Ordinance Books No See 2018-001

2017-002 2017 Internal Control over Bank Reconciliations Yes


MANAGEMENT LETTER

To the Town of Homer Homer, Louisiana In planning and performing our audit of the financial statements of the Town of Homer, as of and for the year ended December 31, 2018, we considered the Town’s internal control to plan our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control. However, during our audit, we noted certain matters involving internal control that are presented for your consideration. This letter does not affect our report dated October 29, 2019, on the financial statements of the Town. We will review the status of these comments during our next audit engagement. Our comments and recommendations, which have been discussed with appropriate members of management, are intended to improve the internal control or result in other operating efficiencies. We will be pleased to discuss these comments in further detail at your convenience, to perform additional study of these matters, or to assist you in implementing the recommendations. Our comments and management’s responses are summarized as follows: ML2018-001 Management of Funds First Reported 2018 Criteria Financial statements are prepared under the assumption that the Town will continue to be able to operate and meet its obligations in a timely manner. Operating at a deficit, failing to meet obligations when they are due, and using funds intended for other activities or functions are indicators that there is some doubt as to whether the Town can continue as a going concern. In Louisiana, laws and regulations are designed to encourage local government entities to operate and manage utility systems (water and sewer) as business-type activities where the users of the systems pay the cost of their usage. Costs of the system include current year operating costs as well as future repairs, maintenance, and upgrades to infrastructure and equipment.

TOWN OF HOMER HOMER, LOUISIANA MANAGEMENT LETTER FOR THE YEAR ENDED DECEMBER 31, 2018

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Condition As of December 31, 2018, the Town had the following in equity and cash positions in its major funds:

Total

Equity

Equity Available for Use

Cash (Excluding Amounts Restricted for Meter Deposits

and Debt)

Average Annual

Expenditures/ Expenses

Years’ Expenditures/Expenses in

Equity Government-

Wide Governmental

Activities $3,416,644 ($300,405) $516,801 $2,270,000 NONE Government-

Wide Business-Type

Activities/Enterprise Fund $5,970,274 $1,387,854 $602,173 $1,370,000 1.0

General Fund $354,778 $354,778 $213,641 $520,000 0.7 Street Fund $26,607 $26,607 $6,502 $329,000 0.1 Industrial

Development Fund $49,117 $49,117 $108,287 $86,000 0.6

Police Fund $16,071 $16,071 $5,553 $829,000 0.0 Generally speaking, a good rule of thumb for equity is six months to one year of expenditures. However, for Business-Type Activities, future repairs and upgrades should be planned for. Therefore, the need for reserves in that fund may be much larger. At December 31, 2018, none of the activities or funds are in an ideal position and the governmental activities are in a deficit position with respect to unrestricted equity. If current levels of revenues and expenditures continue, or if expenditures increase without an increase in revenues, or if a major repair is required, the Town’s activities and funds are at risk for sliding into deficit positions. Cause Costs typical rise faster than revenues. Many municipalities rely on grants to fund repairs and upgrades. Many elected officials are reluctant to raise utility rates. Effect The Town may not be able to sustain current service levels or properly maintain its utility systems.


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Recommendation We recommend that the Board explore options for increasing revenues and decreasing expenditures in the General Fund. Such options may include asking the taxpayers for ad valorem or sales taxes to support the police department, fire department, street department, or general purposes and/or reducing the level of service in the police or fire departments. We also caution management and the Board to be conservative in approving budgets/expenditures of the General Fund. We recommend that management and the Board use Enterprise Fund monies only for utility systems. We noted that, in early 2019, over $200,000 was transferred from Enterprise Fund to General Fund to fund recreation department projects. Finally, we recommend that management and the Board routinely evaluate utility rates annually to determine whether rate increases are necessary to maintain and upgrade the utility systems. Management’s Response See management’s corrective action plan. ML2018-002 Organization of Grant Files First Reported 2018 Criteria Internal control over grant files is essential to ensuring that the Town complies with laws, regulations, and grant agreements. Proper grant files provide an audit trail and assist in determining appropriate accounting entries, thus affecting the financial statements. Condition While testing grant transactions, we noted that files could be better organized, that some files were incomplete or missing documents, and that some documents were included that were meant to be included in other files. Cause Grant projects typically require a significant amount of paperwork. Whomever is charged with maintaining the files must have some knowledge of the grant program. Effect The Town could fail to comply with requirements set by laws, regulations, or grant agreements. The Town’s financial statements could be misstated. Recommendation We recommend management evaluate internal controls over grant administration and revise written policies and procedures accordingly. Staff in charge of grant files should be properly trained and supervised. Management’s Response See management’s corrective action plan.


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ML2018-003 Approval and Documentation of Travel Expenses First Reported 2018 Criteria Common basic practice for internal control over travel expenses includes the following: authorization prior to travel, limitations on different types of expenses, documentation of who incurred expenses and why, receipts for expenses, documentation of approval of documents, and documentation of approval for payments and reimbursements. Condition We selected for testing five transactions involving different officials and employees. Two out of five exceeded the GSA or state rate. Two out of five did not include evidence that the documentation had been reviewed and approved. Cause The cause of the condition is likely failure of clear communication of requirements. Effect The Town could pay unnecessary expenditures. Recommendation We recommend that management evaluate current internal control and revise written policies and procedures as deemed necessary. Management should also clearly communicate requirements to officials and employees. Management’s Response See management’s corrective action plan. ML2018-004 Utility System Management Training for Officials and Employees First Reported 2018 Criteria Proper internal control includes proper training. Condition In our experience, many elected officials and employees responsible for overseeing or managing water and sewer systems have not had formal training in all aspects of management and operation. Cause Elected officials and management may not be aware of training sponsored by the Louisiana Rural Water Association.


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Effect Management mistakes could occur, or inefficiencies could cost the Town unnecessary expenses. Recommendation We recommend that all elected officials and appropriate employees be required to attend the training offered by the Louisiana Rural Water Association. Management’s Response See management’s corrective action plan.

Olivia.Davis

Typewriter

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Olivia.Davis

Typewriter

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Olivia.Davis

Typewriter

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Independent Accountant's Report on Applying Agreed-Upon Procedures

To the Town of Homer and the Louisiana Legislative Auditor We have performed the procedures enumerated below, which were agreed to by Town of Homer (Entity) and the Louisiana Legislative Auditor (LLA) on the control and compliance (C/C) areas identified in the LLA’s Statewide Agreed-Upon Procedures (SAUPs) for the fiscal period January 1, 2018 through December 31, 2018. The Entity’s management is responsible for those C/C areas identified in the SAUPs. This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants and applicable standards of Government Auditing Standards. The sufficiency of these procedures is solely the responsibility of the specified users of this report. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. The procedures and associated findings are as follows: Written Policies and Procedures

1. Obtain and inspect the entity’s written policies and procedures and observe that they address each of the following

categories and subcategories (if applicable to public funds and the entity’s operations):

We obtained the entity's written policies and procedures along with the employee

handbook.

a) Budgeting, including preparing, adopting, monitoring, and amending the budget

The policy included the preparing, adopting, monitoring, and amending of

the budget.

Exceptions: None

b) Purchasing, including (1) how purchases are initiated; (2) how vendors are added to the vendor list; (3) the preparation and approval process of purchase requisitions and purchase orders; (4) controls to ensure compliance with the public bid law; and (5) documentation required to be maintained for all bids and price quotes.

The policy did not include (1) how purchases are initiated or (2) how

vendors are added to the vendor list.

Exceptions: See above.

Management’s Response: See Management’s Corrective Action Plan

TOWN OF HOMER REPORT ON STATEWIDE AGREED-UPON PROCEDURES FOR THE YEAR ENDED DECEMBER 31, 2018

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c) Disbursements, including processing, reviewing, and approving

The policy included the referenced functions.

Exceptions: None

d) Receipts, including receiving, recording, and preparing deposits. Also, policies and procedures should include management’s actions to determine the completeness of all collections for each type of revenue or agency fund additions (e.g. periodic confirmation with outside parties, reconciliation to utility billing after cutoff procedures, reconciliation of traffic ticket number sequences, agency fund forfeiture monies confirmation).

The policy did not include management's actions to determine the

completeness of all collections.



e) Payroll/Personnel, including (1) payroll processing, and (2) reviewing and approving time and attendance records, including leave and overtime worked.

The policy included reviewing and approving leave and overtime worked but

does not include payroll processing or the reviewing and approving for time

and attendance records.



f) Contracting, including (1) types of services requiring written contracts, (2) standard terms and conditions, (3) legal review, (4) approval process, and (5) monitoring process

The policy discusses the services requiring written contracts and the necessary

legal review, but does not define the standard terms and conditions,

approval process, or the monitoring process.



g) Credit Cards (and debit cards, fuel cards, P-Cards, if applicable), including (1) how cards are to be controlled, (2) allowable business uses, (3) documentation requirements, (4) required approvers of statements, and (5) monitoring card usage (e.g., determining the reasonableness of fuel card purchases)

The policy discusses (1) how the cards are to be controlled, (3)

documentation requirements, (4) required approvers of statements but does

not discuss (2) allowable business uses, or (5) monitoring card usage.




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h) Travel and expense reimbursement, including (1) allowable expenses, (2) dollar thresholds by category of expense, (3) documentation requirements, and (4) required approvers

The policy discusses (1) allowable expenses, (3) documentation requirements,

and (4) required approvers, but does not discuss (2) dollar thresholds by

category of expense.



i) Ethics, including (1) the prohibitions as defined in Louisiana Revised Statute 42:1111-1121, (2) actions to be taken if an ethics violation takes place, (3) system to monitor possible ethics violations, and (4) requirement that all employees, including elected officials, annually attest through signature verification that they have read the entity’s ethics policy. Note: Ethics requirements are not applicable to nonprofits.

The policy discusses (2) actions to be taken if violation occurs but does not

discuss (1) the prohibitions as defined by Louisiana Revised Statute 42:1111-

1121; and (3) system to monitor possible ethics violations or (4) requirements

of annual attestation.



j) Debt Service, including (1) debt issuance approval, (2) continuing disclosure/EMMA reporting requirements, (3) debt reserve requirements, and (4) debt service requirements.

The Town has not adopted or implemented a formal written debt service

policy.



Board (or Finance Committee, if applicable)

2. Obtain and inspect the board/finance committee minutes for the fiscal period, as well as the board’s enabling

legislation, charter, bylaws, or equivalent document in effect during the fiscal period, and:

We obtained and reviewed the board minutes for the fiscal period, as well as the

board's charter in effect during the fiscal period.

a) Observe that the board/finance committee met with a quorum a least monthly, or on a frequency in accordance with the board’s enabling legislation, charter, bylaws, or other equivalent document.

We observed the Board met at least monthly.

Exceptions: None


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b) For those entities reporting on the governmental accounting model, observe that the minutes referenced or included monthly budget-to-actual comparisons on the general fund and major special revenue funds, as well as monthly financial statements (or budget-to-actual comparisons, if budgeted) for major proprietary funds. Alternately, for those entities reporting on the non-profit accounting model, observe that the minutes referenced or included financial activity relating to public funds if those public funds comprised more than 10% of the entity’s collections during the fiscal period.

The minutes did not reference or include monthly budget-to-actual

comparisons.


Management’s Response: See management’s corrective action plan.

c) For governmental entities, obtain the prior year audit report and observe the unrestricted fund balance in the general fund. If the general fund had a negative ending unrestricted fund balance in the prior year audit report, observe that the minutes for at least one meeting during the fiscal period referenced or included a formal plan to eliminate the negative unrestricted fund balance in the general fund.

We obtained the prior year audit report and observed a positive unrestricted

fund balance in the General Fund.

Exceptions: None.

Bank Reconciliations

3. Obtain a listing of client bank accounts for the fiscal period from management and management’s representation

that the listing is complete. Ask management to identify the entity’s main operating account. Select the entity’s main operating account and randomly select 4 additional accounts (or all accounts if less than 5). Randomly select one month from the fiscal period, obtain and inspect the corresponding bank statement and reconciliation for selected each account, and observe that:

We obtained a listing of bank accounts for the fiscal period from management.

We selected the main operating account and randomly selected four additional

accounts. One listed account was not opened until 2019. Therefore, we omitted

one account and chose another account. We randomly selected one month and

obtained and inspected the corresponding bank statement and reconciliation.

Exceptions: None

a) Bank reconciliations include evidence that they were prepared within 2 months of the related statement closing date (e.g., initialed and dated, electronically logged);

All five of the bank accounts selected were prepared within two months of the

closing date.

Exceptions: None


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b) Bank reconciliations include evidence that a member of management/board member who does not handle cash, post ledgers, or issue checks has reviewed each bank reconciliation (e.g., initialed and dated, electronically logged);

None of the bank reconciliations included evidence of review.



c) Management has documentation reflecting that it has researched reconciling items that have been outstanding for more than 12 months from the statement closing date, if applicable.

None of the bank reconciliations included stale items older than 12 months.

Exceptions: None

Collections

4. Obtain a listing of deposit sites for the fiscal period where deposits for cash/checks/money orders (cash) are

prepared and management’s representation that the listing is complete. Randomly select 5 deposit sites (or all deposit sites if less than 5).

We obtained a listing of deposit sites for the fiscal period where deposits for

cash/checks/money orders (cash) are prepared and management's

representation that the listing is complete. The Town has only 1 deposit site.

Exceptions: None

5. For each deposit site selected, obtain a listing of collection locations and management’s representation that the

listing is complete. Randomly select one collection location for each deposit site (i.e. 5 collection locations for

5 deposit sites), obtain and inspect written policies and procedures relating to employee job duties (if no written

policies or procedures, inquire of employees about their job duties) at each collection location, and observe that

job duties are properly segregated at each collection location such that:

We obtained a listing of collection locations and management’s

representation that the listing is complete. The Town has only 1 collection site.

We inquired of employees about their job duties. We observed that job duties are

properly segregated as per below.

a) Employees that are responsible for cash collections do not share cash drawers/registers.

We noted no exceptions.

Exceptions: None

b) Each employee responsible for collecting cash is not responsible for preparing/making bank deposits, unless another employee/official is responsible for reconciling collection documentation (e.g., pre-numbered receipts) to the deposit.


Exceptions: None


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c) Each employee responsible for collecting cash is not responsible for [posting collection entries to the general ledger or subsidiary ledgers, unless another employee/official is responsible for reconciling ledger postings to each other and to the deposit.


Exceptions: None

d) The employee(s) responsible for reconciling cash collections to the general ledger and/or subsidiary ledgers, by revenue source and/or agency fund additions are not responsible for collecting cash, unless another employee verifies the reconciliation.

We noted no employee responsible for reconciling cash collections to the

general ledger.



6. Inquire of management that all employees who have access to cash covered by a board or insurance policy for

theft.

We inquired of management. All employees who have access to cash appear to

be covered by a bond or insurance policy for theft.

7. Randomly select two deposit dates for each of the 5 bank accounts selected for procedure #3 under “Bank Reconciliations” above (select the next deposit date chronologically if no deposits were made on the dates randomly selected and randomly select a deposit if multiple deposits are made on the same day) . Alternately, the practitioner may use a source document other than bank statements when selecting the deposit dates for testing, such as a cash collection log, daily revenue report, receipt book, etc. Obtain supporting documentation for each of the 10 deposits and:

We randomly selected two deposit dates for each of the 5 bank accounts

selected for procedure #3 under “Bank Reconciliations” above. We obtained

supporting documentation for each of the 10 deposits.

a) Observe that receipts are sequentially pre-numbered.


b) Trace sequentially pre-numbered receipts, system reports, and other related collection documentation to the

deposit slip.


c) Trace the deposit slip total to the actual deposit per the bank statement.



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d) Observe that the deposit was made within one business day of receipt at the collection location (within one week if the depository is more than 10 miles from the collection location or the deposit is less than $100).

We tested 10 deposits, with 15 receipts included in those deposits. We noted 4

deposits were made within one business day of receipt at the collection

location, or within 1 week if the deposit was less than $100. We noted 2

deposits were not made within one week, or within 1 week if less than $100.

We noted 9 instances where we were unable to determine if the receipt was

deposited within one day of collection, because the receipt date was not

documented for checks mailed into the Town for which a receipt is not issued.



e) Trace the actual deposit per the bank statement to the general ledger.


Non-Payroll Disbursements (excluding card purchases/payments, travel reimbursements, and petty cash purchases)

8. Obtain a listing of locations that process payments for the fiscal period and management’s representation that the

listing is complete. Randomly select locations (or all locations if less than 5).

We obtained a listing of locations that process payments for the fiscal period and

management's representation that the listing is complete. There is only one

location.

Exceptions: None

9. For each location selected under #8 above, obtain a listing of those employees involved with non-payroll purchasing and payment functions. Obtain written policies and procedures relating to employee job duties (if the agency has no written policies and procedures, inquire of employees about their job duties), and observe that job duties are properly segregated such that:

We obtained a listing of employees involved with non-payroll purchasing and

payment functions. There is only one employee with such duties. We inquired of

the employee about her job duties, as there are no written policies relating to

employee job duties.

a) At least two employees are involved in initiating a purchase request, approving a purchase, and placing an order/making the purchase.

We noted there are at least two employees involved in initiating a purchase

request, approving a purchase, and placing an order/making the purchase.

Purchases can be initiated by department heads (Mayor, Superintendent,

and Police Chief), and all purchase orders must be approved by the Mayor.

Exceptions: None


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b) At least two employees are involved in processing and approving payments to vendors.

We noted at least two employees are involved in processing and approving

payments to vendors. Payments are processed by the Accounts Payable Clerk,

and all checks must be signed by the Mayor and a designated board member.

Exceptions: None

c) The employee responsible for processing payments is prohibited from adding/modifying vendor files, unless another employee is responsible for periodically reviewing changes to vendor files.

The employee responsible for processing payments is also allowed to

add/modify vendor files. We noted no employee who periodically reviews those

changes/additions.



d) Either the employee/official responsible for signing checks mails the payment or gives the signed checks to

an employee to mail who is not responsible for processing payments.

We noted the employee who prepares the checks also mails the checks after

they are signed, in most cases.



10. For each location selected under #8 above, obtain the entity’s non-payroll disbursement transaction population

(excluding cards and travel reimbursements) and obtain management’s representation that the population is

complete. Randomly select 5 disbursements for each location, obtain supporting documentation for each

transaction and:

We randomly selected 5 disbursements from the funds maintained by the Town,

since there was only one disbursement location. We used judgment in

determining which funds to select the sample out of.

Exceptions: None.

a) Observe that the disbursement matched the related original invoice/billing statement.

We noted 21 disbursements did match the related invoice/billing statement.

However, 4 out of 21 disbursements were not supported by original

invoices/billing statements.



b) Observe that the disbursement documentation included evidence (e.g., initial/date electronic logging) of segregation of duties tested under #9, as applicable.


Exceptions: None


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Credit Cards/Debit Cards/Fuel Cards/P-Cards

11. Obtain from management a listing of all active credit cards, bank debit cards, fuel cards, and P-cards (cards) for

the fiscal period, including the card numbers and the names of the persons who maintained possession of the

cards. Obtain management’s representation that the listing is complete.

We obtained from management a listing of all active credit cards for the fiscal

period, including the card numbers and the names of the persons who

maintained possession of the cards. We obtained management's representation

that the listing is complete.

Exceptions: None

12. Using the listing prepared by management, randomly select 5 cards (or all cards if less than 5) that were used during the fiscal period. Randomly select one monthly statement or combined statement for each card (for a debit card, randomly select one monthly bank statement), obtain supporting documentation, and:

There were four cards on the list. Therefore, all cards were selected for testing.

We randomly selected one monthly statement for each card and obtained the

available supporting documentation.

a) Observe that there is evidence that the monthly statement or combined statement and supporting documentation (e.g., original receipts for credit/debit card purchases, exception reports for excessive fuel card usage) was reviewed and approved, in writing, by someone other than the authorized card holder. [Note: Requiring such approval may constrain the legal authority of certain public officials (e.g., mayor of a Lawrason Act municipality); these instances should not be reported.)]

We determined that one card had no activity for the year. Therefore, there

were no statements to test. For one of three statements tested, we observed

evidence that the monthly statement was reviewed and approved in writing

by someone other than the approved cardholder. We did not observe written

review and approval on two of three statements.



b) Observe that finance charges and late fees were not assessed on the selected statements.

We noted no finance charges or late fees on the selected statements.

Exceptions: None


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13. Using the monthly statements or combined statements selected under #12 above, excluding fuel cards, randomly select 10 transactions (or all transactions if less than 10) from each statement, and obtain supporting documentation for the transactions (i.e. each card should have 10 transactions subject to testing). For each transaction, observe that it is supported by (1) an original itemized receipt that identifies precisely what was purchased, (2) written documentation of the business/public purpose, and (3) documentation of the individuals participating in meals (for meal charges only).

Of thirteen transactions tested, we noted ten transactions were supported by

original itemized receipts. Three transactions were not supported by original

itemized receipts.

We noted eight of thirteen transactions were supported by documentation of the

business/public purpose while five of thirteen transactions were not.

We noted no transactions including meal charges.



Travel and Travel-Related Expense Reimbursement (excluding card transactions)

14. Obtain from management a listing of all travel and travel-related expense reimbursements during the fiscal period and management’s representation that the listing or general ledger is complete. Randomly select 5 reimbursements, obtain the related expense reimbursement forms/prepaid expense documentation of each selected reimbursement, as well as the supporting documentation. For each of the 5 reimbursements selected:

We obtained general ledgers from management and management's

representation that the general ledgers are complete. We created a listing of

travel and travel-related expense reimbursements from the general ledgers. We

randomly selected 5 reimbursements from that listing and obtained the related

documentation for each reimbursement selected.

Exceptions: None

a) If reimbursed using a per diem, agree the reimbursement rate to those rates established either by the State of Louisiana or the U.S. General Services Administration (www.gsa.gov).

We noted three reimbursements that were issued using a per diem. Two out

of three reimbursements were not in accordance with the State of

Louisiana's travel guide rates.



b) If reimbursed using a per diem, agree the reimbursement rate to those rates established either by the State

of Louisiana or the U.S. General Services Administration (www.gsa.gov).

Two of the selected reimbursements were issued based on actual costs. Both

reimbursements were supported by original itemized receipts.

Exceptions: None.


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c) Observe that each reimbursement is supported by documentation of the business/public purpose (for meal charges, observe that the documentation includes the names of those individuals participating) and other documentation required by written policy (procedure #1h).


d) Observe that each reimbursement was reviewed and approved, in writing, by someone other than the person receiving reimbursement.

For two of the reimbursements, there was no documentation that the

reimbursements were reviewed and approved.



Contracts

15. Obtain from management a listing of all agreements/contracts for professional services, materials and supplies,

leases, and construction activities that were initiated or renewed during the fiscal period. Alternately, the practitioner may use an equivalent selection source, such as an active vendor list. Obtain management’s representation that the listing is complete. Randomly select 5 contracts (or all contracts if less than 5) from the listing, excluding the practitioner’s contract, and:

We requested from management a listing of all agreements/contracts for

professional services, materials and supplies, leases, and construction activities

that were initiated or renewed during the fiscal period. We identified several

agreements/contracts that were initiated or renewed before the fiscal years. We

did not consider such contracts for testing. We obtained management’s

representation that the listing is complete. As there were only 4 contracts that

were initiated or renewed during the fiscal period, we selected all 4 contracts

for testing.

Exceptions: None

a) Observe that the contract was bid in accordance with the Louisiana Public Bid Law (e.g., solicited quotes or bids, advertised), if required by law.

We noted no contracts on the list that were subject to the requirements of the

LA Public Bid Law.

Exceptions: None.

b) Observe that the contract was approved by the governing body/board, if required by policy or law (e.g.

Lawrason Act, Home Rule Charter).

We noted all contracts were approved in the minutes.

Exceptions: None.

c) If the contract was amended (e.g. change order), observe that the original contract terms provided for such an amendment.

We noted no contracts that were amended.

Exceptions: None.


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d) Randomly select one payment from the fiscal period for each of the 5 contracts, obtain the supporting invoice, agree the invoice to the contract terms, and observe that the invoice and related payment agreed to the terms and conditions of the contract.

We randomly selected one payment from each of the four contracts tested.

We agreed the invoice to the contract terms and the related payment to the

terms and conditions of the contract. We noted no exceptions.

Exceptions: None.

Payroll and Personnel

16. Obtain a listing of employees/elected officials employed during the fiscal period and management’s

representation that the listing is complete. Randomly select 5 employees/officials, obtain related paid salaries and personnel files, and agree paid salaries to authorized salaries/pay rates in the personnel files.

We extracted an employee listing from the client's accounting software and

randomly selected five employees/officials. We obtained related paid

salaries/wages and personnel files and agreed the paid rate to authorized

rate for all five employees.

Exceptions: None

17. Randomly select one pay period during the fiscal period. For the 5 employees/officials selected under #16 above, obtain attendance records and leave documentation for the pay period, and:

We randomly selected one pay period during the fiscal period and obtained the

available attendance records and leave documentation for the pay period.

a) Observe that all selected employees/officials documented their daily attendance and leave (e.g., vacation, sick, compensatory). (Note: Generally, an elected official is not eligible to earn leave and does not document his/her attendance and leave. However, if the elected official is earning leave according to policy and/or contract, the official should document his/her daily attendance and leave.)

Four out of five selected employees are hourly employees. One employee is

salaried. Attendance records were maintained for the hourly employees. The

Town does not require attendance records for salaried employees.


Management’s Response: See Management’s Corrective Action Plan.

b) Observe that supervisors approved the attendance and leave of the selected employees/officials.

One employee did not maintain an attendance record. Three of the

remaining four attendance records were signed by supervisors. Two out of five

employees used leave during the selected period. Approval of leave was

documented for one employee.




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c) Observe that any leave accrued or taken during the pay period is reflected in the entity’s cumulative leave records.

Two out of five employees used leave during the selected period. One of the

two employees' leave records reflected that leave was taken.



18. Obtain a listing of those employees/officials that received termination payments during the fiscal period and management’s representation that the list is complete. Randomly select two employees/officials, obtain related documentation of the hours and pay rates used in management’s termination payment calculations, agree the hours to the employee/officials’ cumulate leave records, and agree the pay rates to the employee/officials’ authorized pay rates in the employee/officials’ personnel files.

Management did not list any employees who received termination payments.

Exceptions: None

19. Obtain management’s representation that employer and employee portions of payroll taxes, retirement contributions, health insurance premiums, and workers’ compensation premiums have been paid, and associated forms have been filed, by required deadlines.

We obtained management’s representation that employer and employee portions

of payroll taxes, retirement contributions, health insurance premiums, and

workers’ compensation premiums have been paid, and associated forms have

been filed, by required deadlines.

Exceptions: During other procedures, we noted errors in calculating the basis for

retirement contributions which resulted in errors in contributions submitted to

the retirement system. Management will need to determine the total amount of

the errors. The evaluation could result in amounts due from or to employees or

retirement systems.


Ethics

20. Using the 5 randomly selected employees/officials from procedure #16 under “Payroll and Personnel” above,

obtain ethics documentation from management, and:

We requested ethics documentation from management for the five

employees/officials selected for testing under procedure #16.

a. Observe that the documentation demonstrates each employee/official completed one hour of ethics training during the fiscal period.

We observed documentation for two out of five selected employees that

demonstrated that each employee/official completed one hour of ethics

training during the fiscal period.




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b. Observe that the documentation demonstrates each employee/official attested through signature verification that he or she has read the entity’s ethics policy during the fiscal period.

There was no evidence in personnel files of the selected employees that the

employee/official attested through signature verification that he/she read

the entity's ethics policy during the fiscal period. However, management

asserts that signed forms were obtained but they are unable to locate them

after the administration changed effective January 1, 2019.



Debt Service

21. Obtain a listing of bonds/notes issued during the fiscal period and management’s representation that the listing is

complete. Select all bonds/notes on the listing, obtain supporting documentation, and observe that State Bond Commission approval was obtained for each bond/note issued.

Management listed no new bonds/notes issued during the fiscal period.

Exceptions: None.

22. Obtain a listing of bonds/notes outstanding at the end of the fiscal period and management’s representation that the listing is complete. Randomly select one bond/note, inspect debt covenants, obtain supporting documentation for the reserve balance and payments, and agree actual reserve balances and payments to those required by debt covenants.

Management listed no bonds/notes outstanding at the end of the fiscal period.

Exceptions: During audit procedures, we note that there are outstanding notes

and bonds. We tested debt covenants. A sinking fund and reserve were required

for the bond that was tested. The sinking fund was overfunded while the reserve

fund was underfunded by $4,251.70.


Other

23. Obtain a listing of misappropriations of public funds and assets during the fiscal period and management’s

representation that the listing is complete. Select all misappropriations on the listing, obtain supporting documentation, and observe that the entity reported the misappropriation(s) to the legislative auditor and the district attorney of the parish in which the entity is domiciled.

Management listed no misappropriations.

Exceptions: None

24. Observe that the entity has posted on its premises and website, the notice required by R.S. 24:523.1 concerning the reporting of misappropriation, fraud, waste, or abuse of public funds.

We observed the required notice posted at Town Hall and on the Town's website.

Exceptions: None


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We were not engaged to and did not conduct an examination or review, the objective of which would be the expression of an opinion or conclusion, respectively, on those C/C areas identified in the SAUPs. Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures; other matters might have come to our attention that would have been reported to you.

The purpose of this report is solely to describe the scope of testing performed on those C/C areas identified in the SAUPs, and the result of that testing, and not to provide an opinion on control or compliance. Accordingly, this report is not suitable for any other purpose. Under Louisiana Revised Statute 24:513, this report is distributed by the LLA as a public document.

BOSCH & STATHAM, LLC


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